Trading outlook, Easyhotel, holiday trends & other:

A DAY IN THE LIFE:

I’ve started to get birthday congratulations from various pubs, bars etc. which serves to remind me that, as my birthday is quite some time away, I tend to put 1 January as my date of birth whenever I’m obliged to put something on one (non-official) form or another.

That’s not vanity, I put the right year, it’s just that I don’t want my date of birth out there where it can be hacked because, along with your postcode, it’s pretty much all that’s needed to set up a false ID, open a store card at Primark or Poundstretcher or some other select outlet and cause you all kinds of problems.

But it does mean that there are lots of ‘bots out there, many of whom I feel talk to each other, who think that it’s my birthday a week on Sunday and who will be competing to send me texts in the early hours of New Year’s Day to wish me all the best. That’s if I’ve been foolish enough to put my correct mobile number on whatever form I’ve filled in, that is.

And then the pubs, bars, restaurants in question ask me to spend money with them, of course, I don’t think that my welfare is necessarily core to their thinking process but, as they’ve probably got my details because I was parsimoniously filling in the data in order to apply for some voucher or other, they’re barking up the wrong tree.

Anyway, it’s been a funny old year but it’s nearly over now. We’ll be clearing away the bunting and sweeping up the debris the first week of January meaning that, for the moment, all that remains is for Langton to wish all of its readers a very Merry Christmas and a Happy New Year. On to the news:

PUB, RESTAURANT & DRINKS PRODUCERS:

·         The BBPA has written to Liverpool City Council to express concern over the recent decision to implement a Late Night Levy. Brigid Simmonds, Chief Executive, BBPA, commented: ‘Within the area that the levy would cover, Purple Flag status has already been granted, crime and anti-social behaviour is already falling, and there are a number of local partnership schemes operating successfully, including a BID. Considering the above factors, the BBPA has written to Liverpool City Council to request further clarification on the reasoning behind implementation of the levy at Full Council, following a clear recommendation initially not to proceed from the Licensing Committee earlier in the year.’

·         Fleurets has predicted that at least one tenanted pub company will exit the tied lease operating model in 2017 and believes Heineken’s bid for Punch shows renewed confidence in the sector. The property valuer commented: ‘With the Heineken/Patron Capital Advisers offer to purchase [a package] of Punch pubs signalling a new level of confidence in the pub sector, we anticipate the sector will prove sufficiently attractive for others to proceed with plans to invest in the UK pub market. As pressures on ROCE (return on capital employed) increase following the first few request claims for the market-rent-only (MRO) option, the conditions will be in place for at least one other tenanted pub company to exit the tied lease operating model.’

·         Christmas weather. Mild but windy. Last year was extremely warm, this year closer to average. Overall, not bad.

·         JDW and other operators have complained about stealth taxes for many years. Apprenticeship levies, green fees of various descriptions (the need to add cycle sheds etc. to new builds) and now Late Night Levies) probably fall into this category.

·         JDW bought back 50k of its own shares for cancellation at around 862p on Wednesday

·         A property developer based in Hong Kong is understood to have acquired a package of c160 pubs currently let to Greene King from US PE firm Cerberus Capital.

LEISURE TRAVEL & HOTELS:

·         Monarch’s CEO has said that although profits will plateau next year, 2018 will be ‘transformative’ for the business. Monarch was thrown a lifeline in October when it secured a £165m investment from majority shareholder Greybull Capital.

·         Dart Group has announced that it has agreed to buy a further 4 new Boeing 737-800NG aircraft in addition to the acquisition of a total of 30 aircraft announced in 2015. It says the additional 4 aircraft will be delivered between August 2018 and January 2019. Dart adds ‘the terms for these aircraft are substantially the same as those approved by the Board for the 2015 purchases.  At current list prices, the total value of this transaction is US$384m though the Company has negotiated significant discounts from the list price. The aircraft, which will assist the Company in meeting the future anticipated growth of its Leisure Travel business and planned fleet replacement, are expected to be funded through a combination of internal resources and debt. ‘

·         Jet2 has been a major success and Jet2 Holidays is expanding rapidly. Supply can be a problem in the tour operating arena. Demand is, ironically, usually less of an issue though there are some pointing to inflation and cost increases yesterday as potentially putting a squeeze on domestic incomes.

·         easyHotel is expanding its ‘super budget’ portfolio with a new £5m property in Leeds after purchasing the 250-year lease at the former Scala Theatre. The Scala was built in 1922 and will be turned into a 94-room property expected to open in 2018, subject to planning permission. It is the group’s second announcement this week, following its acquisition of a property in Sheffield.

·         easyHotel’s expansion is testament to the ‘fact’ that existing budget hotels seem to suffer from ‘facility creep’. Free towels, TV, internet etc. tend to lead to budget operators no longer offering ‘budget’ prices. They tend to leave a gap beneath themselves and it is into this gap that operators such as Tune, EasyHotel etc. are currently opening.

·         Chief Executive Officer Guy Parsons said: ‘We are delighted to announce our second development project in line with our development strategy announced in September. Leeds, a northern powerhouse city, is already a major regional employment hub which will be further supplemented by the significant planned developments for the city, including the redevelopment of the former Tetley Brewery, Leeds Dock shopping area and HS2.’

·         The US hotel industry posted positive results for the week ending 17 December, with occupancy up 4.7% to 54%, ADR up 4.8% to $111.59 and RevPAR up 9.7% to $60.31.

·         Domestic holidays are on the rise, tourists are spending more and business activity is on the up, but consumers face higher prices as soon as next month, the Bank of England has warned.

·         More people staying in or visiting the UK will be helpful for the country’s balance of payments. On the negative side, capacity constraints could see prices rise.

·         More than 4.5 million people are expected to escape the UK over Christmas and new year despite threatened industrial action by British Airways cabin crew and Virgin Atlantic pilots. Storm Barbara will also hit over the festive period, bringing with it winds of up to 90mph.

·         Monday’s terrorist attack in Berlin appear to have weighed on travel company shares, per The Times. Though not immediately linked to holiday destinations, it’s worth remembering that the Brussels Airport, which killed some 32 people in April this year, had a material negative impact on outbound travel per the country’s tour operators.

·         European hotels posted positive results in November, with occupancy up 4.2% to 70.3%, average daily rate rising 1.5% to €107.14 and RevPAR growing 5.8% to €75.36.

FINANCE & MARKETS:

·         World markets: UK up yesterday on strong mining stocks but Europe down. US markets lower and Asian markets mostly down in Friday trading

·         Brent lower at around $54.85 per barrel

·         Sterling lower vs US$ at $1.2278. Quite sharply lower against the Euro also at 117.6 per Euro

·         US long bonds unchanged at 3.12%. US 10yr gilts move better with yields down at 1.37%

YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:

·         Current trading. Christmas looks OK. City centres may be winding down now, suburbs should still be busy.

·         Current trading. Jan is always dire & Feb is little better. Could be March before we get much insight into the consumers’ mood

·         Current trading. Political issues (and costs) loom with Art50 in March, Brexit planned in March 19, General Election May 20

·         Consumer confidence in the UK rose in December but remains close to levels seen immediately post 23 June per GfK

·         British Institute of Innkeeping (BII) CEO Mike Clist says there is no doubt 2017 will be a tough year for the pub sector’

·         Greene King’s Leisure Spend Tracker shows strong year-on-year growth in eating and drinking out spend in November

·         Thomas Cook has ruled out a return to Sharm el Sheikh next summer, saying ‘the decision ultimately rests with the FCO’

·         Jet2.com is adding four new routes, extra capacity and an additional aircraft to its new base at Stansted for summer 2017.

·         Bank of England agents’ reports suggest ‘activity growth had edged up, but businesses remained cautious about prospects.’

·         House prices could rise 3% next year reports RICS. Real incomes could fall but shortage of supply is the major driver

·         Kingston Smith reports on Brexit survey. Says 31% see UK as worse off post Brexit vote vs 11% better

·         UK car production rose to its highest level in 17yrs in November with c170k vehicles produced in the month.

·         Later tweets: Low volumes unsurprisingly the order of the day. Some travel stocks down on Berlin attack. Little direction elsewhere

·         Some suggest 8.9m consumers have yet to buy a single Christmas present. And what’s the rush, some petrol stations are open Sunday

·         Sainsbury boss Mike Coupe says ‘discounters are now under pressure’. We must have missed that memo. They’re still growing like weeds

·         Consumer confidence minus 8 ‘up to’ minus 7. Got to take your victories where you find them. Telegraph says it’s great news

RETAIL NEWS WITH NICK BUBB:

·         JD Sports: Retailers are working hard to keep the tills ringing ahead of Christmas, but the wretched CMA (Competition and Markets Authority) is working hard to make sure they don’t rip off consumers, so this morning it has announced that it has served “an initial enforcement order” on Pentland Group and JD Sports, in relation to the completed acquisition by JD Sports of Go Outdoors. As far as we understand the process, the purpose of an IEO is to prevent the further integration of the businesses of the parties while CMA decides whether to have a closer look at the merger, so there is no need for great alarm. But the CMA is notoriously picky and the issue is presumably that JD is controlled by Pentland (which owns outdoor sports brands like Berghaus and Ellesse) and that JD has a small chain called Ultimate Outdoors, where there may be
site overlap with Go Outdoors.

·         Inchcape: As the announcement came out at the odd time of 7.19am yesterday morning, we missed the acquisition by the motor group Inchcape of the South American car distributor Indumotora for £234m cash, which represents a multiple of only 8.6x the adjusted EBITDA of £27m anticipated for the 12 months to 31 December 2016. Based in Santiago in Chile, the business is mainly a Subaru dealer and brings Inchcape more scale in its existing markets of Chile and Peru and also gives it an entry point into the new markets of Colombia and Argentina. Notwithstanding the obvious jokes about “cars and trucks for drug barons”, the deal will be usefully earnings enhancing for Inchcape and the City liked the news.

·         Trade Press: Even though this has been a full working week, neither Retail Week or Drapers magazines have been published today, although their websites have been busy. The main story on the RW website is that House of Fraser has unveiled its first store in China (a 6-floor, 425,000 sq ft monster in Nanjing’s International Financial Centre). The Drapers website is still plugging last week’s “Top 100 2016” (its list of the 100 most influential people in the fashion retail industry in 2016), but it also flags that the winner of this year’s Christmas windows competition for independent UK clothing retailers is the department store Coes of Ipswich.

·         Oxford Street Watch: We popped along to Oxford Street yesterday morning, to look for the much-talked panic discounting and didn’t see much sign of it, although if BHS was still with us they would undoubtedly have had red Sale stickers all over their windows…John Lewis was having a break from its fervent price-matching, but Debenhams, needless to say, was heavily promoting its Half-Price Gift Event (not that all gifts were half-price…). M&S at Marble Arch was more interested in advertising the fact that the store is going to be open on Boxing Day than in price cutting and the store was surprisingly quiet, despite a well-executed promotion of its excellent “Mrs Claus” TV ad. The only store we shopped in was Selfridges, courtesy of its surprisingly good Books department, which is located next to the busy Christmas department on the
4th Floor.