Posted: 27 Aug, 2020
On Thursday 30th July TMA NextGen Bristol hosted an insightful panel discussion on the Hospitality & Leisure sector where the speakers discussed current trends, challenges and how restructuring and turnaround professionals can provide support.
The panellists included:
Mark Boughey – Partner, Mazars LLP
Jeremy Jones – Head of Brokerage, Hotels, Christie & Co
Stephen Owens – Managing Director, Pubs and Restaurants, Christie & Co
Peter Fitzgerald – Relationship Director, Business Support Unit, Lloyds Bank plc
We thank Lydia Lloyd for moderating this insightful discussion.
Key features in the current leisure and hospitality market
Opening the discussion, Stephen began by saying that one of the key features he’s seeing in the market right now is a lot of restaurants in distress and that most of the larger chains have already been through a restructuring process. In general, pubs are doing better but there is a ‘polarisation’ occurring between community pubs and those in city centres. Without office workers to fill them, city pubs haven’t done much trade since being allowed to reopen at the beginning of July whereas community pubs have done much more. Interestingly, Stephen said that this is the opposite of what happened in 2008, when community pubs were the ones struggling.
As a broker, Jeremy said the key trend he’s seeing is an uptick in interest from new buyers wanting to enter the market. Seen as the ultimate status symbol, high-net-worth investors have long been attracted to owning hotels and with UK hotels experiencing a bounce in sales due to the ‘great British staycation’ it’s an attractive investment right now. Jeremy also said that he’s seen increased levels of interest in alternative use and predicts that there will be a loosening of the planning regime to allow ailing hotels on large sites to be repurposed into care homes, retail centres, and residential housing.
Mark said that he has been encouraged to see hospitality businesses looking to new revenue streams to generate some cash flow however he also worries about restaurants and bars in city centres and how they will cope once the furlough scheme ends and loan repayments need to be made.
As a lender, Peter has seen the Small & Medium Business (SMB) sector remain active with government support schemes having a noticeable impact on short term business cashflow. He is mindful about what will happen when certain government support mechanisms come to an end. However, he has noticed a greater drive for cost efficiencies within SMB’s, and if they are sustainable, then could help support longer term survival.
The panellists then shared the key issues that are concerning their clients right now with Mark’s clients most worried about whether they should keep trading or call it a day, which Mark said must be addressed with continuous assessments of a business’ viability. Another key concern he’s seeing amongst clients is that of refunding deposits. Often used as working capital, businesses are struggling to find the cash to refund them, particularly for larger deposits such as for weddings.
As a broker, Stephen’s clients are most concerned about when they should go to market and if they can afford to wait until conditions improve. But with the difficulties of forecasting right now, he said that values are hard to pin down and advice must remain fluid.
Amongst Peter’s clients, the concern was initially to try and understand and maximise government and bank support where appropriate. As a lender, his priority was to get a good grasp on the cash situation, and support where possible from bank led solutions. Moving towards the ‘re-build’ phase of discussions he needs to understand the cash impacts and associated strategy implications of the support mechanisms, as well as understanding what distress had been the result of Covid-19 and what was present before.
Threats and opportunities
Moving on to the threats facing the market, and opportunities available, Peter thinks that with many businesses in the sector relying on summer trade to build reserves for the winter (and to fund investment), the next few months will be key for many, but noted that some (especially ‘staycation’ destinations) have already started showing early signs of a good uptick in activity. The end of the peak summer period will coincide with certain government support mechanisms stopping, and COVID related concessions such as deferred finance and creditor payments beginning again. The return of good levels of activity next summer season will also be important to meet the cash requirements of government backed loan repayments, such as Bounce Back Loans.
Mark is increasingly seeing deferred rent as a threat. While it has been a help to tenants, landlords have their own obligations and are beginning to struggle to meet them after months of uncollected rent. But speaking of opportunities, Mark said that he expects to see more strategic mergers between hotel and restaurant brands looking to streamline costs and also hopes to see a relaxation of the planning regime to allow for alternative uses. Jeremy agreed, saying that he hopes to see the planning regime relaxed and would welcome this as a great opportunity to repurpose obsolete hotels around the country.
In terms of the support they’re providing to their clients, Jeremy and Stephen said that while they’re in a position to learn about what works and what doesn’t for their various clients, they are sharing this intelligence to ensure they can all benefit from best practice. They’re also using their skills to support clients with cash flow analysis and using this to advise them on the best time to go to market.
Peter’s team at Lloyds have been supporting their SMB clients by helping them to understand their short term financial position and longer term viability, and as part of this, setting out how the bank can help them. Mark has been working on scenario planning with directors in an effort to forecast into an uncertain future.
Overall, the panellists were in agreement that during this uncertain time, no one has all the answers. But that as specialists in their sectors, their job is to support businesses with as much information as possible to help them recover and in due course, prosper.
Thank you to all the speakers for their time and to everyone who joined the webinar.
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