60 seconds with… Neil Morgan, Corporate Licensed Division - Christie & Co

Which Businesses do you think are best positions to “bounce back”/who have pivoted well?

In economic downturns there are always “Winners & Losers”, however in a global pandemic “Survivors & Losers”

This entire situation will hasten the demise on businesses that were already destined for closure

Those that have been proactive in taking corrective measures have avoided the worst of this initial period of distress, however, some operators will not be able to survive a “second wave” without targeted support

Fared better:

• Destination pubs and restaurants benefitting from “localisation“(beer gardens – Temp structures increase covers)
• Country hotels or pubs with rooms– tapping into Staycation
• Companies with strong investor relations 
• Well run businesses with strong operational teams

Not so

• Subsectors not receiving enough support (vertical drinking and late-night venues)
• Smaller companies with little access to debt/equity

What market trends (concept/colleagues/customers) are you forecasting for after the crisis?

Operationally wise: many operators will need fewer employees – cutting costs, may revert to traditional opening hours.    Not all doom and gloom, it may be easier to find skilled workers

Property side of things:

• There will be casualties (Restaurants -predominantly LH) going through CVA’s, and Admins. 
• Opportunity for “opportunistic” buyers PE’s, cash rich companies or High Net Worth Individuals
• May see some prime assets come to the market as some companies will seek to recover cash. 
• There is also less of an impact on their Pre-Covid Net book values
• Private Equity backed Pub Co’s will see this crisis as opportunity
• Investors will see investment opportunities in quality operators and businesses with further growth potential
• Opportunity for the private buyer – will see volume of individual “bottom end” pubs for continued licensed or non-licensed 
• Expansion of the “Franchised model” as Pub Co’s seek ways to lighten HO costs
• On leaseholds may see more T/O related rent deals.

What role has technology played?

• Cashless society – cash is a thing of the past!
• Table ordering via Apps now likely to be a permanent more widespread feature and will be the new norm
• Booking a table just for a drink as well, maybe even pre-ordering food before arrival 
• Key is getting your CRM right
• Localisation (home workers) – booking for tables both Lunchtime and evenings: easy to use websites and easy booking procedures key.
• I think work from Home will be more prevalent going forward – For companies, it will help reduce HO overheads (reduced office space and rents > Go to “Hot Desking”)

Marketing and customer/employee communication

• Those who have communicated well with customers are likely to have greater customer loyalty
• Expansion of the “Loyalty” Card - utilise the customer lists for marketing initiatives/ promotions etc
• Will we see the return of the Two 4 One offers? 
• Customers seem to appreciate the service provided better now and operators need to maintain this level of support and engagement
• Some companies have used video calls (Zoom/Microsoft Teams…), Facebook and other forums to communicate with both their “at work” and furloughed employees to maintain that “Team Spirit” – will see this continue

Challenges regarding reopening/re-establishing

• Providing a welcoming social environment 
• Ensuring customers feel safe – tell people what measures they have in place
• Maximise trade space (permitted No of covers) – use external areas
• Capex - monies earmarked for improvements otherwise used to pay off debts! 
• For now, limit stock and menu choice. 
• There may be another lockdown…

Thoughts on Government support and other initiatives that could improve things?

• More Government support is required!
• Financial support, especially for those businesses that have not been permitted to open – Nightclubs, Theatres, Vertical drinking pubs/bars etc 
• Government to continue rates holidays or reliefs
• Retain the 5% VAT on food sales 
• Limit the trading hours on off sales in Supermarkets & off licences – level the playing field 
• Expansion of the T/O rent mechanism on new as well as existing leased businesses

Role of Landlords, investors/backers through this period?

• Investors have been generally supportive, landlords are waiting on the side lines
• Some investors have readily available sources of monies to fund acquisitions (opportunistic purchasers)
• Industry landlords (Pub Co’s) have supported their tenants – rent concessions, deferments and in some cases, holidays
• Private institutional landlords less so and may show their teeth in the coming months.

Which “positives” you will take from this crisis?

• The sector has been unified if only in adversity
• The trade bodies – BII, BBPA and UKH have done a stunning job in lobbying parliament and providing vital guidance and information to their members.   
• Publicans got a break, have re-assessed their business how they trade and attracted more locals
• Community Pubs will greatly benefit – Lockdown has seen more of a “community spirit”
• Cost saving efficiencies – staffing
• Non licensed – Local traders and supply chains benefitted

How to get people back to work/customers back to spending

• City Centres may take some time to return to how they were before, and some changes may be permanent. 

                 - Some companies will reduce their office space and rent liability

                 - Negative effect on businesses that survive on daytime office worker trade

• The economic fallout and impact are unknown/uncertain
• Impact on consumers maybe limited for now so make hay. 
• Unemployment may recover but taxes will go up and affect the spending power but at least a year away 
• Get back spending – promotions/marketing initiatives
• Huge challenge!! – getting people away from their Sky boxsets (stay at home culture) and back into pubs & restaurants. Eating & drinking at home saves them money and may change their behaviour in Food & drinking out,

Your hope for where this lands in the future and learnings we can take for future business?

• Needs to be a level playing field with retailers on Vat and rates 
• Hopefully a realisation that hospitality is a key part of society and the economy 
• Landlords look to keep rents economically viable and take an interest in their tenants’ business(es)
• More diversification in food offers in the “High St” which up until now dominated by Pizza/Pasta operations. 
• Seeing better quality smaller individual single/multiple operators come in and take over the vacant sites which must be great for us all the consumers.
• We will undoubtedly lose some pubs, but I hope not as many as some are saying.
• The Private transactional pub market has been strong these past few months and long may it continue.
• Encouraged to see growth in the traditional freehold/free house market with new entrepreneurs!

Christie & Co website: https://www.christie.com/