Langton Capital – 2021-05-04 – Rental debt, inflation, labour sourcing, overseas holidays etc.:
Rental debt, inflation, labour sourcing, overseas holidays etc.:
A DAY IN THE LIFE:
Six degrees yesterday at 3pm up north with driving rain.
Not what the beer gardens ordered, that’s for sure and, as my various alarms, back up alarms and the like knew that it was Monday but not that it was a Bank Holiday, I was up just in time to see a bunch of ugly, wet-looking clouds appear from the south and blot out the sun and that’s the way it stayed all day.
Anyway, on a different topic, I had to give myself a talking to over the weekend as I’d started to eat an apple, found that it tasted like slightly flavoured, watery mush, and decided that I had to stick with it as I’d paid for it and couldn’t let it go to waste.
But as, unlike Langton, it was horrible, past its sell-by date and easily replaced by a fresher version, I decided that I could let it go to waste so I threw caution to the wind, binned it and had another one.
A small triumph over my Yorkshire genes here but it might not last. On to the news:
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PUBS & RESTAURANTS:
• In premium email: Scrapping the 2m rule, NTIA in Scotland, Grosvenor landlord support, HelloFresh Q1 numbers & Nightcap acquisition. Also, Langton comment on stories included below.
• UKH has called for ‘decisive Government action on rent debt to help safeguard sector recovery and protect up to a million hospitality jobs.’ It has written to the Government ‘urging it to adopt its [UKH’s] proposals to help tackle the £2.5bn rent debt crisis that threatens to wreck the hospitality sector’s recovery and risks further widespread job losses.’ It says the moratorium on eviction has kicked the can down the road but nothing more. It says government action to date ‘has not dealt with the huge amount of commercial rent that is still technically owed and which will be demanded by landlords once that ban expires.’
• UKH suggests a further 6mth extension on protections and ‘the developing of a national-level adjudication process on ‘legacy rent debt’ that should aim to share the pain of closure (with at least 50% of rent debt written off for this period, and at least 25% written off when the sector operated under restrictions).’ It calls ‘for landlords and tenants to come to reasonable repayment terms, led by guidance and further protections if necessary.’ CEO Kate Nicholls said: “The time has come to get this issue sorted. As a starting point, our overriding principle is that businesses and landlords have to share the pain caused by enforced closures and restrictions. With the right outcomes, we can help to protect the hospitality sector in the short-term and accelerate its recovery – contributing to more jobs and reviving high streets and communities.’ She adds ‘we are concerned that the removal
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• On this topic, Virgin Active is in the High Court attempting to reschedule liabilities – including rental liabilities. Landlords are playing hardball. Car park company NCP has said it needs to have its rents cut in order to survive and other companies, including Caffe Nero, Travelodge and many others, have faced objections to proposed amendments to liabilities.
Supply & operating issues:
• Though the weather has let the side down in recent days, reopening has gone relatively well. Attention is now moving on to staffing, beer shortages, supply lines etc.
• Staffing. The Guardian runs a major piece saying that ‘the hospitality industry is facing a staffing crisis as restaurants and pubs say that up to a quarter of those employed before the Covid-19 pandemic will not return.’ It says M&B has lost 9,000 of its 39,000 staff and D&D needs to recruit 400 staff to plug gaps. Pizza Express is looking for 1,000 staff and many other operators are in the same boat. Chefs are in short supply and wage inflation could result. The Guardian point to Peter Borg-Neal, the chairman of pub owner Oakman Inns’ comment that the real scale of the problem would not be revealed until the furlough system ends in September and it becomes clear how many workers would never return.
• Beer shortages. The government and the weather forecasters have not been able to offer any certainty to the trade and the trade has been reluctant to commit to beer orders. Beer production is a chemical process and lags are inevitable. Shortages have developed. Suppliers, unsurprisingly, have favoured larger customers or those who have been prepared to place firm orders. Vertically integrated beer & pub companies have been in a relatively secure position.
• Lynx Purchasing says that ‘hospitality businesses should factor flexibility into their menu planning to deal with rising food and drink prices over the coming months.’ It says ‘as the sector reopens after the long winter lockdown, a number of factors are combining to create a “perfect storm” in inflation terms.’ Lynx says ‘suppliers are having to make educated guesses about levels of demand from their hospitality customers.’ It says that menu flexibility and engineering could mitigate some price pressures.
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Other covid news:
• Gigs. Some 6,000 partygoers in Liverpool were able to take part in the UK’s first restriction-free gig over the weekend.
• Tied leases. The BBPA has reported that Leased & Tenanted pubs received £27,000 each on average in support from operators over the Covid pandemic. It says ‘pub operators have received a fraction of this support from commercial landlords, with many receiving no rent waiver or even discount at all.’ The support ‘comes in the form of reduced or waived rent, as well as other support such as help with re-opening costs, refunds for spoilt beer and staff PPE. Just in terms of reduced rent and charges waived, this equates to around 85% of average annual rent.’
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• No shows. CGA reports that no-shows have blighted an otherwise busy reopening for operators. It says up to one in seven customers who has made a booking is failing to show up. CGA says ‘one in seven (14%) consumers have not fulfilled their bookings. While some cancelled their reservations ahead of time, around one in 12 (8%) admits to being a no-show after failing to tell their venue they would not be visiting.’ The situation could be an ongoing problem. CGA says ‘bookings are going to be at the core of operations for a long time to come. Venues may need to consider and communicate new policies around their reservation terms, and make it as easy as possible for people to cancel so they can reallocate valuable space.’
• KAM Media reports that ‘there is a huge appetite from consumers for bringing hospitality brands into their own homes.’
• UK Inbound has stressed the importance of inbound tourists in driving city centre recoveries.
Company & other news:
• Restaurant Dive in the US reports that a number of operators Stateside have looked closely at ‘ghost kitchens’ but have decided not to progress with them. It quotes Modern Restaurant Concepts as saying ‘driving awareness without having an actual physical location in a trade area just proved to be more challenging than we expected, and actual staffing and operations in a small format again proved to be more challenging than we were expecting.’
• Starbucks is reported set to hire 400 staff as demand recovers. See also staff shortages story above.
• The Zero Carbon Forum, the non-profit organisation leading the hospitality industry to net zero, has its new advisory board. Members include Andy Hornby of The Restaurant Group, Colin Hill of Nando’s, Emma McClarkin of the BBPA and Kate Nicholls of UKH.
• London-based digital restaurant platform Taster has raised $37m in new funding
• Asahi has bought NZ coffee company Allpress. The company sells more than 1,500 tonnes of coffee beans annually worldwide
• Keurig Dr Pepper has reported Q1 numbers showing an 11% increase in revenues. The company has raised revenue guidance for the year as a whole to growth of between 4% to 6% (was 3% to 4%).
HOTELS & LEISURE TRAVEL:
• A cross-party group of MPs has suggested that holidays abroad should be discouraged even when they are legalised. The MPs are concerned about the importation of a new strain of Covid. Their report says ‘the UK government should discourage all international leisure travel to prevent the importation of new variants into the UK, in order to reduce the risk of a third wave and further lockdowns.’
• STR has suggested that the UK will be the country that will lead the recovery of the hospitality sector in Europe.
• The CDC has confirmed that the US cruise industry could restart in mid-July
• In the UK, Disney has confirmed that adult customers for its Disney Cruise Line’s Magic at Sea UK itineraries must be fully vaccinated against Covid-19
• Destination Analyst in the US has reported that 87% of American travellers are expecting to take trips between Memorial Day and Labour Day (between 31 May and 6 September).
• The New York Times has reported that Europe could soon welcome fully-vaccinated US visitors.
• William Hill’s betting shop empire is reported to be up for sale
• Yahoo and AOL have been sold by Verizon to a US private equity firm
FINANCE & MARKETS:
• The Eurozone economy fell back into recession in Q1 this year when it shrank in size by 0.6%.
• The Nationwide reported on Friday that house prices rose by 2.1% in April, their largest monthly increase since 2004. Prices are up 7.1%, year on year.
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