Langton Capital – 2016-11-14 – London hotels, consumer spending, costs & other:
London hotels, consumer spending, costs & other:A DAY IN THE LIFE: Langton got a cab in London for the first time in quite a while last week and I swear we could have walked faster. In fact, putting parsimony and general mean-spiritedness to one side for the moment, that might well be part of the reason that we so rarely take taxis because, though you could probably move at quite a lick if you wanted for some reason to leg it from Aldgate to City Airport at 6.30am, you move considerably less quickly if you want to head in a westerly direction some 2hrs later. And they’re not cheap, are they? Even with three or four of us in the vehicle it must work out as triple or quadruple the price of the Tube and it was certainly slower on this occasion than both the underground and, I hear, the Handsome Cabs of the 1880s. We had snow on the ground (briefly) in York midweek last week but it’s warmer now. Cold by the end of the week, though. On to the news: LONDON HOTELS PANTS IN OCTOBER… • The facts as we know them: STR has released preliminary data for London hotels in October • It says an increase in supply (+2.9%) met a decrease in demand (down 1.2%) • This led to a 4.0% decrease in occupancy • Rate fell by 7.7% and REVPAR was some 11.4% lower • Comps are tough, the Rugby was on last year: Well, yes. But that would only account for the demand shift • And, whilst demand can go down & then up, supply increases tend to be permanent • STR points out ‘the absolute occupancy level would be the lowest for an October in London since 2008.’ • It says ‘the y-o-y percentage changes also mark London’s largest October declines for occupancy and ADR since 2001.’ • That’s not very good, is it? No two ways about it, this is negative news • Facility creep – putting on more services, charging higher prices – may exacerbate the problem • Room rates have behaved as one would expect. Some operators have cut costs & other have been obliged to follow suit • Is this a one-off, bad month? Well go on, you can believe that if you want • But the answer, probably, is no • Listed UK hotel operators are thin on the ground but arguably Whitbread, which has put on a lot of capacity, might have timed its expansion better PUB, RESTAURANT & DRINKS PRODUCERS: • Visa’s UK Consumer Spending Index shows spending +2.4% in October versus the same month a year ago. • Visa says UK hotels, restaurants & bars see strongest y-o-y spending growth vs all other sectors at +9%. Spending on clothing & footwear was +4.7%. • Visa says eCommerce spending in Oct was +4.3% y-o-y but face to face spend was only +1.8%. Transport spending was down 1.4%.
• Visa reports ‘consumer spending growth rose to a 6mth high in October. Talk of potential price rises does not appear to have dented consumers’ confidence, with spending up 2.5% on the year, on a par with pre-referendum levels.’ It continues ‘the experience economy continued to fuel this growth. Hospitality and leisure were the best performing sectors once again, boosted perhaps by the half term break and Halloween, with a noticeable increase in spend on food and drink. We’ve also seen two strong comebacks this month. Clothing and footwear bounced back strongly from a disappointing dip in the previous month, up 4.7% in October, and the highest level of growth since September 2015. New season stock, combined with a chilly start to winter created the perfect conditions for the high street to rebound from last month’s flat line.’ Visa concludes ‘as we get closer to the all-important • Sunday Times has beer prices rising by up to 30p per pint on the back of NLW, input and business rates cost increases • Retailers & leisure said to be facing a ‘perfect storm’ re cost increases & margin pressures. • Anecdotal & small sample size but a visit to Tesco suggests the store is looking smart (including its re-engineered ex-Giraffe cafes) but prices are not cheap • Young’s CEO Patrick Dardis has warned that an ‘exceptional’ rise in business rates will hit pubs in April 2017 and is likely to add £1.8m to Young’s annual cost base. Dardis also highlighted Brexit uncertainty and cost pressures including the national living wage and the apprenticeship levy as additional challenges facing the pub company in its interim reports for the 26 weeks to 26 September 2016. London pubs are set to absorb a 25.6% rise in business rates over the next five years, while the rest of the country will be subject to an estimated 9.2% rise. • Liverpool council plans to introduce a Late Night Levy despite strong opposition from trade bodies including the BBPA and a previous recommendation not to introduce the measure. BBPA CEO Brigid Simmonds commented: ‘This is very disappointing. Liverpool’s Licensing Committee had rejected a Levy in March, after extensive consultation. Other major cities, such as Bristol and Leeds, have also rejected a levy, which will damage the city’s economy. We are looking at whether the Council can reintroduce the measure in this way, without further consultation. • ‘Pubs are already struggling with high business rates, high beer duty and red tape. This will also undermine partnership schemes between local business, the Council and police, which can produce very positive results.’ • Amazon delivery drivers have reportedly been made to work ‘illegal’ hours and are receiving less than the minimum wage. • Phillip Clark is one of several senior executives named in the lawsuit filed against Tesco by 111 institutional investors for losses in the wake of its £263m accounting scandal. • Marks and Spencer, American Apparel, and Sky are set to close a combined 100 stores, while the 1,250 stores affected by failed retailers so far this year is double the rate of 2015. The FT writes that ‘BHS, Austin Reed, Netto, and My Local have fallen into administration and brands including Banana Republic have withdrawn from the UK’ in 2016. • Dominic Chappell, the controversial ex-owner of BHS, has been arrested in relation to an unpaid tax bill of about £500,000 arising from profits he made as the department store chain failed. Speaking about Swiss Rock’s tax bill in September, Mr Chappell told The Guardian: ‘There was a return that was made in error; they [HMRC] have acted upon it and we are rectifying that as we speak.’ HMRC began legal action against Mr Chappell to recover the sums, but he has put Swiss Rock into liquidation, making it more difficult for the tax man to obtain the funds. LEISURE TRAVEL & HOTELS: • STR data reveals that October was a poor month for London’s hotels, with occupancy down some 4% to 85% as supply continues to be added (+2.9%). Average daily rate fell by 7.7% to £149.72, driving an 11.4% drop in revenue per available room to £127.23. Demand declined across both weekday and weekend business, meaning the market failed to recapture last year’s levels, while absolute occupancy was the lowest for an October since 2008 and the lowest decline since 2001. • EasyHotel announces completion of acquisition of site for easyHotel in Barcelona. It says it ‘confirms that further to its announcement on 4 October 2016 regarding the grant of planning permission for a 204-room easyHotel located on Gran Via, the main avenue of L’Hospitalet de Llobregat, it has now completed the acquisition of the land for the new build easyHotel Barcelona. The hotel is expected to open in early 2018.’ • The bosses of Airlines UK and Board of Airline Representatives in the UK are calling on the government to remove Air Passenger Duty in the Autumn Statement. Tim Alderslade and Dale Keller argue that such a move would signal to the world that the UK is open for business and would benefit ‘airports across the UK with plenty of spare capacity’. • Speakers at the International Travel Crisis Management Summit have said that security measures put in place at Egypt’s Shar el-Sheikh airport means it is now safer than Heathrow. Dr Taleb Rifai, secretary general of the UN World Travel Organisation said that the must relax its stance and encourage tourism, explaining: ‘What’s happening in Egypt, and Turkey, is a breeding nest for terrorism because we fail to understand that there is a bigger picture. People are eager for tourists to come back. Wait another year, that’s too late. Half of those jobless people are going to be recruited by ISIS.’ • David Scowsill, president and chief executive of the World Travel and Tourism Council, was in Egypt last week to inspect the $32 billion upgrade of security at Egyptian airports by British experts and agreed: ‘We are comfortable with what the Egyptian government has put in place to protect British travellers… We do not know if that’s a security issues or something else’. • Virgin Trains says it has doubled the number of ex-offenders it employs as part of its aim to help end the ‘revolving door syndrome’ of reoffending. The company has been actively recruiting ex-offenders since 2013. • Snoozebox’s has paid down its outstanding balance by £1.3m to £7.6m and has negotiated to make interest only payments on its debt for the next three quarters. OTHER LEISURE: • William Hill updates on Q3 trading saying it has seen an improved mobile Sportsbook and that Online has returned to growth • Wm Hill Q3, 17wks to 25 Oct. Group says they ‘continue to expect full-year operating profit to be at the top end of previous £260-280m guidance, subject to normalised gross win margins in the rest of the year’ • Wm Hill. Says it is seeing ‘positive performance continuing in international markets with double-digit wagering and net revenue growth in H2 to date in Australia, the US and Italy and Spain’. • Wm Hill says will cut costs by £30m in 2017. Interim CEO Philip Bowcock reports ‘in this period we have continued to focus on Online’s turnaround, identifying efficiencies and international growth.’ He adds ‘Online has returned to wagering growth in the UK following significant enhancements to our mobile Sportsbook in Q2 and we are making good progress on the gaming and user experience improvements in H2.’ Bowcock says ‘our international businesses are all performing well, with double-digit wagering and net revenue growth in each of our key markets of Australia, the US and Italy and Spain. In a tough market, the Australian business is benefiting from our in-house technology.’ • Wm Hill CEO reports ‘looking forward, we remain on track to deliver 2016 operating profit at the top end of our guided range. With our significantly improved products and user experience, we are confident that this is the right time to invest further in our Online business. Therefore, the marketing efficiencies we are announcing today will be reinvested in driving faster digital growth to benefit future performance.’ • Walt Disney Co has promised earnings growth for the next two years amid investor concerns over a quarterly drop in ad sales and subscribers at its ESPN sports network. Disney and media rivals face challenges from ‘cord cutters’ who are dropping TV subscriptions for cheaper and more convenient online services, such as Netflix and Amazon Prime. FINANCE & MARKETS: • UK construction sector, a major bellwether re employment trends, recorded its weakest growth in 4yrs in Sept quarter per ONS. Construction volumes fell by 1.1% in the quarter. • Building materials firm SIG reported on Friday that business had slowed down. • JP Morgan boss Jamie Dimon has warned against a rush to Brexit. He is calling for a multi-year transition period • Emerging markets have continued to fall in the wake of the election of Donald Trump • US Fed vice-chair Stanley Fischer has said that the US is strong enough to continue raising rates • Sterling has recovered further against the US$ and the Euro in the wake of the Trump election. A pound buys $1.26 or €1.16 • Sunday Times has pointed out that the election of Donald Trump with his expansionist policies, has led to a $1tn US bond sell off • Japan’s economy expanded by an annualised 2.2% in Q3 • The Money Advice Service has said that youngsters aged 16-17 need financial education before adulthood • World markets: UK & Europe down Friday. US mostly better but Far East down in Monday trading • Brent crude down at around $44.80 per barrel • Rightmove reports UK house prices rose by 4.5% in the year to November YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE: • BBPA, SIBA, and CAMRA have published ‘The Story of Beer Duty: 2008-2016’, call for no further increases, more cuts required • Markets sanguine in wake of Trump victory though Constellation Brands, the largest US importer of Mexican beer, has seen its shares fall • Qatari officials have confirmed a ban on alcohol in public spaces during the 2022 Qatar World Cup & seek alcohol ban in stadiums • Spain is poised for another record year of international arrivals, with 74 million holidaymakers due to visit the country in 2016, +9% y-o-y • Reuters reports ECB pushing through changes banks’ calculation of capital requirements. Move will aid their move from UK to Europe • ECB reported to be considering measures to maintain oversight of Euro trading for when Britain leaves the EU • Later Tweets: Trump win shows American Dream in action. Anyone can be President, even the billionaire son of a billionaire • STR shows London hotels taking a hit. Says supply +2.9% in the month (on last year) but demand down 1.2%. Occ. Down 4%, REVPAR down 11.4% • London hotels down the pan in Oct but comps (Rugby World Cup) were tough. STR says REVPAR minus 11.4% on increased supply • Alibaba shifts $1bn of stock in first 5 mins of ‘Singles Day’. Averages $1bn per hour for the rest of the day • Disney misses estimates but promises better growth over the rainbow. Correction, over the next two years • Commodities still polarised. Sweets (incl. sugar, cocoa, coffee & OJ) very strong but staple prices weak to down • Gold up, down, down. Oil down, up, up. Copper & iron ditto. Stock prices ditto. The ‘I told you so’ brigade are out in strength • BDO points out cold snap helped fashion sales last week. An upward zig in a longer term downward zig-zag? • Trump victory makes Britons only 2nd biggest fools of 2016. But hang on, their problems could be over in 4yrs, ours could last 50 RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The new John Lewis Christmas TV ad (and its controversial use of foxes) generated plenty of column inches in the Saturday papers, eg in the News pages of the Times and the Daily Mail. Otherwise, Marks & Spencer remained in focus, although the Times’ main Business story was that Phil Clarke and Lawrie McIlwee are among several former senior Tesco Directors named in a £100m lawsuit against Tesco over its 2014 profit overstatement. And Danny Higgins of Tesco Bank was the Daily Mail’s “Zero of the Week”, but Steve Rowe of Marks & Spencer was the Mail’s “Big Shot of the Week”, on the back of a detailed profile of the South Londoner and Millwall FC fan. The FT Review of the Week flagged that M&S is “set for store closures to focus on upmarket grocery” and many of the stockmarket reports noted that M&S was amongst the Fashion retailers that rallied on Friday,
• Sunday Press: Marks & Spencer was again in the spotlight in the Sunday papers, with the Sunday Times flagging that it faces “gaps on shelves” over a row with small Food suppliers about pricing, after CEO Steve Rowe refused to compensate them for adverse currency swings. The Business editorial in the Sunday Times thundered that his promise not to pass on price rises to consumers “seems both laudable and silly”, whilst the Business Leader column in the Observer (which separately mocked M&S’s failure in Paris, in contrast to the success of Superdry Overseas) thundered that M&S must re-think its approach to Fashion and “Rowe must surely follow the success of the Food business and make M&S clothing more aspirational”. The Observer also flagged that Brexit is bad news for wine prices/Majestic and pricing was a general theme elsewhere, with the Sunday Telegraph noting that
• Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s Grocer magazine saw Asda win for the 5th week in a row, but it was pushed hard by guest retailer Iceland. The Asda basket of £52.42 was just 5p cheaper than Iceland, with third-placed Tesco over £5 behind on £57.44, although that was before the Tesco instant “Brand Match” discount of £3.00, whilst the Asda guarantee to be at least 10% cheaper than its rivals cost it a £0.81 voucher. Morrisons was beaten for fourth place by Sainsbury, whose £57.88 basket was £1.38 cheaper than Morrisons. Poor old Waitrose was way behind, as usual, with a basket costing as much as £69.03, well over £16 more than Asda…There was more bad news for Waitrose in the separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability, as its store at Horsham came joint bottom, with a very poor score of • News Flow This Week: Another busy week kicks off tomorrow with the B&M interims and the Card Factory Q3 update, as well as the latest Kantar/Nielsen grocery market share figures (for the 4/12 weeks to Nov 5th). On Thursday Asda will then have to try to explain away another dreadful quarter of LFL sales declines, on the back of the Wal-Mart Q3 in the US, whilst that day also brings the ONS Retail Sales figures for October, the Majestic Wine interims, the Ted Baker Q3 and the Boohoo Spring/Summer range preview. This week is also busy in the world of Retail property, with the Land Securities interims tomorrow and the British Land interims on Wednesday. |
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