Updated: 21st December 2018
A hugely diverse sector, leisure and hospitality is the fourth largest industry in the UK employing 10% of all workers across the country. Such an all-encompassing sector faces a multitude of challenges, some common across the industry, others more specific to certain areas.
Increases to the national living wage and minimum wage, uncertainty for foreign workers in the wake of Britain’s exit from the EU, plus legislative changes are having their impact felt across the entire sector; however, specific changes to the political, cultural, and economic landscape are hitting certain areas particularly hard.
Industry Impact
Travel and tourism
The weak pound has so far helped the tourism industry remain buoyant, with the UK representing a good value destination particularly for overseas visitors. However, uncertainty around visas for tourists following the UK’s departure from the EU threatens to hinder visitor levels which will in turn negatively impact hotel occupancy levels, lessen demand for services provided by excursion companies, and hit the popularity of tourist attractions.
Bookmakers and gaming
Well reported controversy over FOBTs has seen the bookmaking and gaming industry suffer reputational damage and even find itself at the centre of new government legislation. Recent and upcoming changes to the law surrounding the use of FOBTs, including restrictions on the number of terminals allowed in any one store, as well as the impending slash to the maximum stake, is expected to hit high street bookmakers hard. Planning for a FOBT-free future comes with undeniable challenges and while further store closures appear to be inevitable, this does not mean the industry is in a state of terminal decline with online betting channels retaining and growing in popularity.
Restaurants, pubs, and bars
Increasingly health-conscious attitudes coupled with a cultural shift, is seeing the current generation’s social activities less centred around alcohol. Eschewing nights in the pub for alternative social experiences is having a devastating effect on the ongoing viability of many pubs and bars across the country. Detrimental for some, these societal changes present huge opportunities for others to seize upon. Dessert-only dining has experienced a huge increase over the past few years, with these establishments being a hot spot for social gatherings without the alcohol, while the rise of veganism and vegetarianism is bolstering demand for restaurants catering for our changing palettes. With the right structure and funding in place, there is an opportunity for businesses both new and existing, to capitalise on these shifting desires and habits.
A squeeze on discretionary spending has undeniably hurt the retail industry; however, as consumers move away from physical goods, instead preferring to spend on experiences, those operating in both the travel and food and drinks industry could reap the rewards. Reserving eating out for special occasions, an increasingly discerning clientele is prepared to spend more for experiential dining, albeit less frequently. This shift has spelled trouble for the casual dining market evidenced by the restructuring of several well-known eating establishments; however, for those with something new to offer, the opportunities are there.
The need for sector-specific expertise
With uncontrollable external factors and changing consumer preferences, operating within the highly competitive leisure and hospitality sector is more challenging than ever before. To give you the best chance of succeeding, you need a firm who understands the intricacies and appreciates the specific challenges being faced by you and your competitors.
Whether you are looking to expand or divest, we can provide the expert help and advice to ensure this is done in a manner appropriate to your business model and future growth ambitions, while remaining sensitive to likely industry challenges. From microbreweries, large distilleries, owner-managed dining establishments through to leading high street restaurant chains, we are regularly approached to assist with devising and implementing growth strategies, restructuring distressed businesses, as well as negotiating mergers, acquisitions, and handling disposals.
Growth strategies
We can put a strategy in place which will not only allow you to keep up with regulatory change and shifting consumer preferences, but to thrive under these challenging circumstances. Adapting your business model and tailoring your approach to embrace these changes, will allow you to maximise the opportunities presented by this changing landscape. For those businesses looking to take advantage of emerging markets, our team of corporate finance experts can help you locate a viable acquisition target, and working alongside our commercial finance department, can ensure you have the necessary funds to complete on such a deal.
For an overburdened leisure and hospitality company, a carefully managed process of business simplification can untangle complex operational structures, often arising following a series of acquisitions or mergers. It is vital this process is undertaken under the guidance of a turnaround specialist who will be able to execute the procedure in a balanced manner ensuring operations are not scaled down to such an extent as to render the business unprofitable, but likewise to locate and remove enough inefficiencies to realise a significant improvement to immediate liquidity levels.
Businesses which have undergone a period of rapid expansion in recent years are finding their current model is no longer sustainable in today’s challenging climate. This issue is particularly prevalent in the leisure and hospitality sector where holding a significant bricks and mortar presence is more common. Entering into formal negotiations with creditors and landlords has proven to be a viable solution for some.
Our restructuring and turnaround experts can facilitate these discussions on your behalf, before formalising a proposal to turn these negotiations into a legally binding agreement. Unprofitable locations can be closed while a renegotiation of existing lease terms means liquidity can be improved immediately while also reducing the burden of long-term liabilities.
