Leisure and hospitality

Heavily dependent on consumer spending, the sector will find 2010 another challenging year. Rising living costs, increasing unemployment and jobs uncertainty will all force consumers to keep a close eye on their disposable income and demand bargain offers.

Pub drinking declined sharply in 2009, with 11 pubs closing every week in London alone, according to new figures issued by the British Beer & Pub Association (BBPA) – and hitting other regions hard. In response, campaigners for the pubs industry are calling on the Government to reverse the 8% increase in duty on beer imposed after VAT cuts last January, now the 17.5% rate has returned – and to scrap the proposed 2% above inflation increase, in this year’s Budget. Yet, as the Chancellor sees an 84% share of the £8.6 billion total tax and profit on beer sales, this will be a battle.

The gambling industries have a mixed outlook overall. Although the ‘recession opportunists’ spend more in downturns and 2010’s major sporting events provide industry optimism, changes to gambling licence rules and the smoking ban were key factors behind Agora, a high-street chain of adult gaming centres, going into administration with Baker Tilly in late 2009.

In contrast, confidence amongst the UK hotel industry is restoring, according to the latest Hotel Confidence Monitor from TRI Hospitality Consulting, with half of hotel managers ‘more optimistic’ in Q4 than Q3 2009, bolstered by Christmas trading. According to Bob Cotton, Chief Executive of the British Hospitality Association, “innovative and sustained marketing programmes, professional management [and] rigorous cost controls” lead to fewer hotel insolvencies than expected for 2009. Last year, Baker Tilly traded and sold a number of high-profile hotels, including The Forbury in Reading and Haleys in Leeds.

Challenges

For hotels, price-sensitivity will result in a decline in average room rates, squeezing margins; business travel looks to be further replaced by networking technologies, such as conference calling; jobs uncertainty and rising living costs increase consumer reluctance to spend on leisure pursuits; the 17.5% VAT rate return is already hitting hard, particularly in the pubs segment.

Opportunities

A change in government could lead to a change in tax for the beer and pub industries; a ‘stay home’ mentality during recessions presents continued opportunities for domestic tourism, particularly in regions hit hard in other industries.