By Daniel Hunter
UK leisure businesses including pubs, restaurants, clubs and cinemas are facing a tough summer as many consumers continue to tighten their belts due to the uncertain economic outlook.
Events such as the Olympics are expected to bring only a temporary boost to operators, according to a report by advisory firm KPMG.
Among those who go out increasing numbers are becoming “professional bargain and discount hunters”, says the report, with 40% of consumers now making a restaurant choice based on offers and discounts available.
Although not favoured by the industry, many operators have become to rely on discounting, including the issue and redemption of vouchers (Groupon and variants of the same), to combat fluctuations in trade. For many businesses the habit is difficult to relinquish.
“The prospects for the sector are not exactly rosy and the war for the discretionary consumer pound will continue," Justin Zatouroff, European Head of Leisure at KPMG commented.
"The good news is that for many UK consumers a base level of expenditure on leisure is now part of everyday life and eating out especially remains an ‘affordable treat’ for many. London continues to be a market in its own right and businesses in the capital are expected to outperform those in the rest of the country.
“Therefore with little organic growth for the economy in sight, the future for leisure businesses is likely to remain tough but stable and largely unexciting in terms of the potential to implement grand visions and pursue acquisition strategies.”
The estimated value of the UK leisure market in 2011 was around £66 billion, down £4 billion since 2007, the start of the economic downturn. Analysts expect a further dip in 2012. (In real terms, with the effects of inflation removed, the decline in the value of the market is even greater, at 22% between 2006 and 2011.) The sector employs about an estimated 1.8 million people, nearly 10% of total UK employment.
Against this as a backdrop there appears to be little appetite on the part of major operators to enter into significant M&A activity — not least because growth prospects across the market are limited.
“KPMG’s analysis points to an overall situation of operators continuing to struggle with maintaining margins in a continually tough market," Justin Zatouroff commented.
"On the positive side, there appear to be few shocks in store for operators and lenders provided the former continue to manage competitively and the latter closely scrutinise the operating performance of businesses they lend to.”
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