Leisure: responding to an experiential crisis
This week’s Retail Note analyses the latest CGA data in parallel to Knight Frank’s new Leisure Research Report, which provides a comprehensive review of all aspects of the market, from F&B through to ‘big box’ leisure formats.
4 minutes to read
Key Messages
- Licensed drinks sales virtually back to pre-pandemic levels
- Sep 2021 sales just -0.9% lower than Sep 2019
- All Leisure spend forecast to rebound by +40.6% in 2021
- Further growth in Leisure spend of +36.0% forecast in 2022
- 980 (-0.9%) Hospitality venues cease trading between Jul and Sep 2021
- 9,900 (-8.6%) Hospitality venues lost since March 2020
- ‘6 Opportunities vs 6 Obstacles’ for the Leisure sector
Intoxicating, but sobering at the same time. The latest releases from CGA on the Hospitality market present very polarized, if not contradictory messages. Polarities and contradictions wholly reflected in Knight Frank’s latest major research report: Leisure: responding to an experiential crisis.
Strong and improving consumer demand
Within both the Hospitality and Leisure markets, there are definitely positive signs and drivers that extend way beyond proverbial green shoots. The latest figures from hospitality industry body CGA show that drinks sales in pubs, bars and restaurants were virtually back to pre-pandemic levels by September. Drinks sales were down just -1% on the same period in 2019, helped by a +24% surge in spirit sales (Freshers’ Week clearly playing no small part). Across other drinks categories, the picture was a bit more mixed – beer & cider sales were both down -8% and wine sales were down -13%.
But the CGA concluded that “pubs, bars and restaurants head into the final quarter of 2021 with good momentum in drinks sales […] consumer demand is clearly strong and with the right support the On Premise can help the country end a very tough year on a high.” Let’s drink to that (responsibly, of course).
This echoes the consumer trends detailed in Knight Frank’s Leisure Report. Always first in and last out of lockdown, consumer spending on Leisure was clearly decimated in 2020, slumping by -54%. But it is already rebounding strongly and Leisure participation levels are demonstrably improving rapidly. Leisure spend is forecast to surge +40.6% in 2021 and a further +36.0% in 2022.
For all its trials and tribulations, it is worth stressing that Leisure was a growth market coming into COVID-19 (achieving a CAGR of +3.4% in the five years prior to 2020) and is likely to emerge a growth market as the pandemic subsides. Whatever any economist may say, consumer spending priorities have been redefined and Leisure is now far less discretionary than it once was.
Ongoing structural challenges
At the same time, we cannot be blind to the Leisure sector’s ongoing challenges. This is more than manifest in the CGA’s latest Market Recovery Monitor, which showed that 980 Hospitality sites ceased trading between July and September 2021 alone. The total number of licensed premises stood at 105,208 at the end of September, -0.9% lower than the 106,188 registered in July. The net loss equates to more than 100 closures every week, or 16 a day. Independent venues (-701 closures) were harder hit than leased venues (-297), while managed venues actually saw a slight increase (+18 openings).
Over a longer timeframe, the numbers are more depressing still. Since March 2020 (which marked the onset of COVID-19, lest we forget) a total of 9,900 Hospitality venues have closed, a staggering -8.6% reduction in capacity in just 18 months.
We acknowledge and explore these challenges in our report, under the banner of ‘6 Obstacles’. By way of short summary, these are:
1. Consumer Reticence (confidence among certain demographics/ages may take time to rebuild)
2. Rent Arrears (operators & landlords must find solutions to the £6.4bn+ backlog before March 2020)
3. Staff Availability (high vacancy rates and acute shortages exacerbated by Brexit etc.)
4. Staff Costs (+2.2% growth in National Minimum Wage increases operators’ ‘wall of costs’)
5. Supply Chain Shortfalls (more red tape at UK borders coupled with well-documented HGV driver shortages)
6. Multi-Channel Teething (integration complexities/costs of online operations and entrustment of brand to 3rd parties).
At the same time, it is not all doom and gloom and perversely, COVID-19 has also thrown up a number of opportunities for the Leisure sector (which we have imaginatively called ‘6 Opportunities’):
1. A Restless Consumer (willing to spend money on leisurely pursuits)
2. Availability of Space (variety of floorplates becoming available through rising vacancy rates)
3. A Receptive Landlord (with increasing appreciation for Leisure in a quality tenant mix)
4. Market Need for Vitality (Leisure ideal formats to revive buzz of town centres)
5. A Multi-Channel Voyage (pursuit of online/takeaway channels provides an additional revenue source)
6. Welcome to the World of Big Data (increased access to customer data via check-in/ordering apps).
Leisure: a multi-dimensional, complex sector, fraught with challenges. But, rest assured, never a dull moment.