Langton Capital – 2020-02-24 – PREMIUM – Apps, Restaurant Group, labour shortages, holiday capacity etc.:
Apps, Restaurant Group, labour shortages, holiday capacity etc.:
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A DAY IN THE LIFE:
Snow on the ground up here in York.
Just enough to be a nuisance though, not enough to look pretty and it may be insufficient to cover up the fox poo that the dog likes to use as perfume at this time of year.
And he doesn’t like to scrimp. More is better than less and he particularly likes to rub the pungent stuff behind his ears, get it all around his head if possible.
And he’s something of a connoisseur as male fox poo is stinkier, apparently. And stinkier has to be better, particularly when you’re firmly of the mistaken belief that the garden rabbits are more likely to let a fox’s toilet to creep up on them than they would be a dog.
Still, each to his own, I suppose. Here’s hoping the trains are OK as we’ll be in London later. On to the news:
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IS IT TIME TO SAVE TIME? CLICK AND COLLECT APPS: Is the hospitality industry serious about saving labour costs? 24 Feb 2020.
Where are we at?
• The only constant is change. Mobiles are taking over from laptops
• People are increasingly turning to their phone to order food
• Many companies see the amount of their product ordered on a mobile device as a KPI, and they may be correct to do so
• Wetherspoons’ app has paved the way for mobile ordering at pubs. McDonald’s is rolling out tablets
• Ordering ahead will work best in pubs and restaurants where interactions with staff aren’t expected/wanted.
• Limited service food outlets, most pubs, coffee shops, grab n go outlets etc, would fit the bill. Full service restaurants much less so
What can apps offer?
• Every year is the year that order ahead apps are going to take off
• But the same could have been said about the Internet around the Millennium. It did take off but getting the timing right was tricky
• Apps will essentially work as operational streamlining services, and therefore need to be integrated with EPOS
• This is more easily said than done
• White label apps are branded by individual restaurant chains
• But, once customers get used to using apps, an aggregator (think hotels.com or booking.com) makes sense
• The aggregator market is congested, it’s hard to spot winners. Several have folded, others have been merged into larger businesses. None have yet clearly ‘broken through’
What does it mean?
• Proving incremental sales’ wins can be difficult but:
o As CRMs, these sites have value
o The customer experience may be improved (which could drive visits)
o And customers may simply demand this service
o Operators could smooth busy periods
o But over-focusing on forward orders can antagonise customers in venue
• We would suggest that consumers will not want to have 20 bespoke forward ordering apps on their phones
• Think hotels. They may have Hilton and Intercon but not a couple of dozen others.
• There is a role for the booking.com or hotels.com in the casual dining market but, as mentioned above, spotting the winner is much easier ex poste than it is ex ante
PUBS & RESTAURANTS:
• The Mail on Sunday reports that Restaurant Group, which announces its preliminary numbers for calendar 2019 on Wednesday, will ‘speed up drastic cuts to The Restaurant Group’s struggling casual dining brands – with Frankie & Benny’s and Chiquito in the new boss’s [Andy Hornby’s] firing line.’
• Further disposals are expected ‘in a tough period for the casual dining sector.’ Exiting failing sites is more easily said (or recommended) than done. The Mail says that out of town retail parks could be high up the list for exit. Some will be converted to Wagamama sites.
• The Mail quotes a stock markets source as saying Restaurant Group has ‘the wrong product, at the wrong price, in the wrong place.’ That seems a little harsh. However, tails are inescapable and it is, perhaps, fair to say that, if you were asked to construct a restaurant conglomerate from scratch, you would not necessarily have all of the Restaurant Group’s brands in all of its sites.
• Revolution Bar Group also reports numbers, half year this time, on Wednesday.
• CGA has surveyed business leaders in hospitality and have concluded that the leaders ‘think the sector needs better support on immigration to avoid crippling labour shortages.’
• CGA’s 2020 Business Leaders’ Survey says the industry needs support ‘for temporary visas to help fill vacancies in restaurants, pubs and bars.’
• CGA’s survey finds that two in five (41%) leaders think a points-based system for immigration would have a negative impact on hospitality—twice as many as think it would have a positive impact (21%). It says its poll also ‘confirms fears that the plans will make it harder to fill roles in an industry that heavily depends on overseas labour.’
• CGA says ‘we know that staff shortages are a huge concern for many restaurant, pub and bar operators, and the new proposals on immigration are only going to make things worse. A points-based system could dramatically affect access to labour, which would hurt investment, weaken the high street and—because we know that service and customer satisfaction are closely intertwined—ultimately reduce the pleasure of eating and drinking out.’
• Fourth Hospitality, which co-authored the report, says ‘this latest announcement on immigration brings much cause for concern across all sectors in the hospitality industry. Given that 53% of our industry’s workforce is made up of overseas workers, the new legislation is set to have a catastrophic impact on the available pool of pub, bar, hotel and restaurant workers. Furthermore, this doesn’t take into consideration the specific nuances of the hospitality industry, such as tips, which are not included in the calculations for the new thresholds.’
• Connect Catering (no2), Landmark London (no4), MOD Pizza (no18) and Dishoom (no20) amongst the top places to work per the Sunday Times.
• The Royal Mail is to put up the price of a first-class stamp 6p to 76p and second-class stamps up 4p to 65p from 23 March. The 8.6% rise in the price of a first-class stamp comes only a year after the last increase. The Mail blames the increases on ‘a challenging business environment’. Hiking prices in what has now become a competitive industry is not always the best answer.
• The MCA has reported that UK pubs have increased visitor numbers across every day part, with breakfast seeing the strongest growth, up 1.7% to 12.4% share of the total eating market at breakfast.
• The artisanal coffee group, The Gentlemen Baristas has announced its intentions to open a further three sites in London.
• Hammerson sells seven retail parks to private equity firm Orion for £400m.
• The fast-casual dining chain PizzaLuxe has announced it will open a third restaurant in Manchester.
• The non-alcoholic wine market is expected to increase at an annual growth rate of 7% between 2019 and 2027, according to research from Fact.MR.
• Hormel Foods has acquired the meat firm Sadler’s Smokehouse for $270m. Jim Snee, Hormel Foods CEO commented: ‘Sadler’s Smokehouse is a great company with an impressive history, talented team and an outstanding portfolio of on-trend products that resonate with consumers, customers and operators,’.
• Champagne shipments for 2019 have declined 1.5% to a total of 297.4m bottles, reaching the lowest level level since the global financial crisis.
• Around 128,000 businesses across the UK have called on Chancellor Rishi Sunak to overhaul the business rates system.
• Per Telegraph, SSP Group are facing a shareholder revolt at its AGM with advisory group Glass Lewis urging investors to vote against SSP’s remuneration report.
HOLIDAYS & LEISURE TRAVEL:
• Travel Weekly has reported that TUI plans to expand its operations by almost 50% to carry up to 30m passengers a year.
• As we have mentioned a number of times, any ‘gap in the market’ left by the failure of Thomas Cook cannot be relied upon to last very long. The failed company’s planes are still keen to fly, the hotels in resort are still taking guests etc. It’s just the flags that will be different.
• The global airline industry is forecast to lose $29.3bn of revenue due to the COVID-19 outbreak, with the bulk of the revenue lost in the Asia-Pacific region.
• Hoseasons doubles its TV advertising budget after an 8% spike in January bookings.
• Landal GreenParks UK has pledged to become carbon neutral by 2030, with measures including the reduction of all single use plastics by 50% in 2020, and phasing them out completely by 2022.
• STR reports US hotel occupancy up 0.2% to 63.6% for the week ending 15 February, with ADR up 0.9% to $133.55 and RevPAR up 1.2% to $85.
• Hyatt Hotels Corporation opened 90 hotels adding more than 19,000 rooms to its portfolio in 2019. The coronavirus (COVID-19) outbreak has caused 26 Hyatt hotels to close in Greater China, and the properties that remain open are operating at ‘very low occupancy,’ CFO Joan Bottarini said.
• A Saharan sandstorm grounded around 820 flights from the Canary Islands on Sunday.
• Tuesday’s strike by Italian air traffic controllers has led to the cancellation of hundreds of flights.
• Per The Telegraph, Powerleague is appealing to its customers for cash in order to keep some of its five-a-side sites operating.
• SpaceX is planning to raise around $250m on a valuation of $36bn. SpaceX has been launching Starlink satellites in batches of 60 since May and currently has roughly 300 orbiting Earth.
• Moody’s reports that the announcement by MGM Resorts that it had suffered a major data breach ‘is credit negative for the company’. It says ‘the incident highlights key risks to entertainment and hospitality companies that handle large amounts of personal data on customers.’
• CVC Capital Partners expects to finalise a £300m deal to acquire a roughly 14% stake in Six Nations. One plan under consideration is to bundle TV rights for rugby competitions around the world into a single package for broadcasters.
FINANCE & ECONOMICS:
• Flash PMIs for the UK show that the composite PMI for February is unchanged at 53.3. any number above 50.0 implies economic expansion.
• The government saw an inflow of £9.8bn in January this year, down from £11.9bn in the same month a year earlier. January sees a large number of taxpayers settling their 2018/19 bills.
• Sky reports that new Chancellor Rishi Sunak has less financial flexibility as a result of reduced tax revenues. Economists had been looking for a January surplus of 11.3bn against the actual £9.8bn.
• IHS Markit has reported that business activity in the US service sector fell last month for the first time since 2013.
• Car sales in China fell by 92% in the first half of this month. A sign of just how seriously the coronavirus is impacting the economy.
• Sterling down vs dollar at $1.2941 but up vs Euro at €1.1957. Oil lower at $57.09. UK 10yr gilt yield up 1bp at 0.59%. World markets lower Friday with Far East down in today’s trade.
• Brexit & politics:
o French President Emmanuel Macron says he is ‘not sure’ that a trade deal can be negotiated between the UK and the EU this year.
o Sky reports that PM Boris Johnson will begin trade talks with the US next month.
START THE DAY WITH A SONG:
Last Friday’s song was Great Balls of Fire by Jerry Lee Lewis. Today, who sang:
“Triangles are my favourite shape,
Three points where two lines meet
Toe to toe, back to back, let’s go”
RETAIL WITH NICK BUBB:
• Saturday’s Press and News (1): The retail park exit by Hammerson was the main talking point in the Saturday papers, with the Times pointing out the problems for property valuers, given the huge 22% discount on the June 2019 valuation in the £450m sale. The Business editorial in the Times mocked the apparent mess that the “two Daves” (CEO David Atkins and Chairman David Tyler) have made of things since they planned a £3.4bn bid for the embattled Intu in 2017, but Lex column in the FT noted that by cutting its debt Hammerson is now in a less precarious financial position than Intu, although Hammerson is still expected to cut its dividend with its finals on Tuesday.
• Saturday’s Press and News (2): The stockmarket reports in the Telegraph and Daily Mail highlighted that Burberry was hit on Friday by a Jefferies downgrade on the back of worries about the impact of the Chinese killer virus, whilst the FT had a feature article on the news that Chinese fashion buyers have pulled out of visiting the upcoming big Spring fashion shows in Paris, amidst concern over the dependence of luxury retailers on Chinese supply chains and Chinese consumers (“Fashion falls victim as virus poses biggest threat since financial crisis”). On a different tack, the Telegraph flagged that Amazon has started a big advertising campaign to help with UK warehouse staff recruitment, given its dependence on cheap European labour. More prosaically, the FT noted that the dispute between WH Smith and the Telegraph has now been settled.
• Saturday’s Press and News (3): In other news, the Times went big on the problems of the John Lewis Partnership, making its main Business story the revelation by the new Chairman Sharon White in an interview in the in-house “Gazette” magazine that there may be more management “upheaval” and that she is not necessarily happy with the controversial new management structure put in place by her predecessor, Charlie Mayfield. The Times also had a separate article about JLP, flagging that the JLP Board will decide this week whether to pay a Bonus for 2019/20, noting that no fanfare is planned for the announcement on March 5th and highlighting the rebellious tone of the Letters page of the Gazette as evidence of poor morale in the business (“Bonus wrangle hangs over troubled brand”). Finally, on top of the JLP stories, the hard-working Retail correspondent of the Times also had a scoop
• Sunday’s Press and News: After a bumper bundle of Retail news and stories in Saturday’s papers, the Sunday papers were a bit of a let-down, and there was nothing of note in the Sunday Telegraph, the Observer or the Mail on Sunday (although the latter did flag that the Restaurant Group will announce in its finals on Wednesday that it will pull its struggling brand Frankie & Benny’s out of retail park locations). The Sunday Times came to the rescue, however, by highlighting that Hammerson will slash its dividend on Tuesday and heavily write-down its assets, amidst more evidence of Retail distress, with the Chinese-owned Aquascutum brand said to be in trouble, Deloitte called in to advise on a restructuring of the struggling Boux Avenue chain and with administrators called in to the TJ Hughes outlet store chain. The Sunday Times also flagged that last week’s reprieve for Laura Ashley
• ABF (Primark): The pre-close trading update today from the food conglomerate ABF covers the 24 weeks to Feb 29th and contains nothing new about the impact of the Chinese virus on the supply chain situation (Primark is currently well stocked and is monitoring potential factory production delays), but eyebrows will be raised at the weakness of current trading at Primark: overall LFL sales are expected to be only flat (despite strong growth in France, Italy and the US), with the core UK business down by 1.3%, after a poor Jan and Feb. Primark say “UK trading was particularly good over November and December, but weakened in January and February against very strong comparatives in the prior year”…
• News Flow This Week: Tomorrow brings the Hammerson finals and the Hotel Chocolat interims. The finals from CapCo (the Covent Garden landlord) are on Wednesday, along with the McColl’s finals, whilst Thursday brings the Inchcape finals, the Howden finals and the Watches of Switzerland Q3 update. Then, with the end of the month approaching rapidly now, we get the monthly GFK Consumer Confidence survey first thing on Friday.