60 Seconds on Rising Interest Rates, Inflation, etc.

November 21 2016

Inflation is coming – who stands to lose out?

  • Interest rates have been kept at 0.5% since January 2009 (even falling as low as 0.25%), distorting the markets
  • Crowdfunding has also played its part wrt excess funding; AltFi research shows that of the 751 companies that have crowdfunded on the UK’s largest platforms, some 88 have gone bust with another 79 suspected to have suffered a similar fate.
  • Meanwhile, a further 34 have undergone a painful downround, suggesting that the probability of a negative outcome for the average retail crowd-funding investor is a considerable 26.7%.
  • These together have driven several important trends in Leisure
  • Cheap money has been one of the primary drivers of estate growth
  • This may soon change as inflation works its way through the economic system and interest rates rise

A rising tide lifts all boats…

  • Fast-expanding diners and bar chains might consider whether the thermals of low interest rates have allowed them to fly too close to the sun
  • Similarly, hotel markets such as London that have seen persistent excess capacity trends might question whether the party’s over
  • A whole generation of operators who have not known anything other than today’s macro environment might be in for a rude awakening.
  • Supply pull, not demand push, appears to be driving sales growth.
  • Incumbents who have seen it all before, meanwhile, might now be looking at the timing of their roll-outs and whether a period of retrenchment is on the cards.