Focus on... leisure

Updated: 21st October

Over the past nine months, the pandemic has affected every aspect of the public’s recreational time, with closures, curfews and restrictions having a major impact on the hospitality and leisure sector.

Since the government announced that all pubs, restaurants, gyms and other social venues needed to close in order to halt the spread of COVID-19 there has been a significant conflict in the fundamentals of leisure, based on social gathering, and the social distancing requirements surrounding COVID-19.

After many businesses reopened to the public on Super Saturday (5th July), the Hotel & Leisure component of Avison Young’s UK Cities Recovery Index saw an initial spike in recovery across the sector. This continued through August, boosted by the Eat Out to Help Out scheme and staycations, with the Index peaking at 70.8 on August 30th. Since then it has declined by 27%. This reflects the end of Eat Out to Help Out and the holiday season and more recently could be an indication of how the government’s tightening of restrictions tiered system have directly impacted recovery. Many businesses are concerned with their viability over the winter ahead and the possibility of localised closures.

NIGHTCLUBS LEFT IN THE DARK

Despite many entertainment businesses able to reopen to the public in some form, nightclubs have remained closed since March. With no indication of when they will be able to return to any level of activity, many are concerned that these businesses will not be able to survive past Christmas. Without additional support, venues will be left with no choice but to permanently close. The UK’s night time economy contributes around £66bn to the UK economy per year according to the NTIA and employs 1.3 million people, many of whom are at risk of losing their jobs as the furlough scheme ends.

The entire industry has gone into survival mode. Nightclubs are not the only leisure premises unable to open, many theatres and music venues have also remained closed during this time. The government has announced a £1.57 billion package to protect the UK’s culture and heritage sectors, with £257 million used to support arts organisations through the pandemic and there was a noticeable sigh of relief when Arts Council England announced that the Culture Recovery Fund would be looking to support nightclubs and music venues. Although this has provided a lifeline for many, it is still a time of uncertainty with many businesses expecting to be closed well into 2021.

"The government has announced a £1.57 billion package to protect the UK’s culture and heritage sectors, with £257 million used to support arts organisations through the pandemic and there was a noticeable sigh of relief when Arts Council England announced that the Culture Recovery Fund would be looking to support nightclubs and music venues"

STAYCATIONS

Some outdoor attractions were allowed to reopen to the public from as early as the 15th June, however, due to the nature of these types of businesses, many weren’t able to fully close operations while the nation was at the height of lockdown. For example, zoos weren’t able to shut down as effectively as other outdoor attractions and with the high fixed costs that come with keeping animals, paired with no admission fees to help cash flow, these businesses are struggling to reach financial sustainability and are still recovering from the impact despite reopening.

One benefit that many attractions have experienced is the influx of staycations in the UK, attracting families to participate in socially distanced days out. Although these types of activities are open, they are largely seasonal and therefore, with the winter months closing in, will face further hardships. These cost implications are threatening the closure of zoos such as London Zoo or Chester Zoo, which recently reported a £5m shortfall in finances due to Covid-19.

THE END GOAL FOR SPORTS

Although the EFL season is now underway, the plan for a return of fans from 1st October was shelved due to the rise in Covid-19 infections. This has caused real concern within the sports industry as ticket sales can account for a high percentage of revenues amongst the lower leagues, in particular.

Some of the clubs were able to generate short term cash by advance ticket sales, which may now need to be returned alongside this year’s season tickets. Almost half of the Premier League’s clubs recorded losses, delivering only the second aggregate pre-tax loss in the past six seasons. This is not only hurting big clubs, but the smaller clubs too, many of whom were in poor financial standing before the pandemic and are now facing bankruptcy.

Given the strong community importance of sports clubs, a plea has been made to the government to provide for their survival in a similar way to the support that has been allocated towards arts and culture. However, the proposal from Manchester United FC and Liverpool FC outlining plans, was poorly received by fans and other clubs alike. Historically, clubs overspend in the pursuit of promotion and typically salary costs are often more than 80% of turnover, which is double the leisure industry standard of 40% or below. The introduction of ‘Squad Salary Caps’ in August by League One and League Two Clubs may help these costs to be more tightly controlled in the future, but there is a real risk that a significant number of these clubs will go bankrupt in the short term, as they are reliant upon ticket sales and secondary revenue generation by fan attendance for a significant proportion of their income.

THE ROAD TO RECOVERY

Some businesses are looking at ways to reform and use assets to adapt and survive during this time. We have seen Buzz Bingo close 26 of its bingo clubs and Cineworld close its doors for the foreseeable future, leading to empty spaces that could be utilised in different ways.

From 1st September 2020, the government announced that a number of A, B and D use classes were to come under a new ‘Class E’, which allows spaces to be repurposed for a wider range of commercial, business and service uses, including retail, food and drink, financial services, indoor sport, nurseries and more. However, in addition to ‘Class E’, many uses that were previously in the same Use Class have now been moved into the ‘sui generis’ category making repurposing trickier than before with changes subject to the planning application process.

There has been much talk about a hard and difficult winter and many of the biggest difficulties could lie ahead, particularly once the support measures have ended. The furlough scheme will soon draw to a close, increasing the pressure on businesses to make decisions around staff retention and redundancies. It will be a long road to recovery for the sector, and more support from government and local authorities will be needed to avoid closures and job losses.

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