Time for pubs to try new custom?

Jan 24 2007 By Graeme King, The Journal

Where have all the good times gone? Bars and clubs are still busy, but changes to licensing laws and an economic slowdown have taken the edge off the leisure industry's performance. Graeme King investigates.

As a region with a justified reputation as a party hotspot, the North-East is suffering from the same slowing in the leisure industry as the rest of the country.

While nobody is exactly crying into their beer just yet, there have been a few signs of late that bar and club operators are not having things all their own way.

Reforms to the licensing laws have created uncertainty about how the public wants to drink, and when, and made it easier for supermarkets to steal more market share on alcohol sales.

The upcoming smoking ban in England and Wales is obliging all operators to re-jig how they operate their businesses - or lose custom to those who do make changes.

And, meanwhile, the broader economic situation is looking a little gloomy, with the rise in interest rates to 5.25% squeezing people's disposable incomes more than at any time in the last five years.

However, the picture emerging from the industry seems to be one of `well, we've just got to get on with it' and that any operators who don't survive will deserve their fate.

Arguably the licensed trade is simply waking up to the way business has been done in the rest of the economy for centuries.

If you sell furniture, or clothes, or cleaning products, you don't have the privileged position of being only one of a limited number of outlets selling your product, open for a set number of hours per day - with demand compressed into handy-size chunks of time, with rivals obliged to operate on the same terms.

So, now it's getting ever more `dog eat dog' and leisure operators are having to rely on quality and service to an extent never seen before.

In recent months, northern business daily has reported on issues including the region's biggest bar operator Ultimate Leisure going through a tougher than usual period; ex-Ultimate boss Bob Senior fore- casting the end of binge drinking as we know it, and beer measurement company Brulines enjoying its best ever period as pub and club operators seek ever more precise data on how their businesses are performing.

Figures from the British Beer and Pub Association show beer sales have been fairly stable for a number of years, at around 35 million barrels per year.

But just where people drink has changed quite a lot. Back in 1990, 80% of beer consumption was in pubs, with 20% at home, while today those percentages have moved to 59% in the pub and 41% at home.

Last year's opening up of the licensing system to allow later hours, both in the `on' trade of pubs and clubs and `off' trade of supermarkets and off-licences, has put more pressure on licensees to perform.

Already, it is clear that bars and pubs have taken on nightclubs for the late night market. Door taxes are frequently charged only on weekends as late night drinking is available in bars without any entry charge.

Bob Senior, now head of Utopian Leisure, and with long experience of the North-East licensed trade, is still optimistic about the industry, but recognises that the landscape has changed for good. He said: "There's an awful lot of capacity right now for bars, after a big explosion in licensing over the last six years - but that has slowed right down now. An awful lot of bars don't pack out now - even on a Saturday night.

"Nobody I know in the business wanted an end to 11pm closing for pubs, and 2am for nightclubs. I think it should have gone to midnight for pubs and 3am for clubs - partly to give the police a level of control.

"Look at two nights out - on a Saturday night, it's packed, you queue to get in a club, you queue for the cloakroom, you queue to get served, you go to the loo and the floor is an inch deep in what you hope is water. You go and get a kebab, and it's stick thin, then you can't get a taxi.

"On a Tuesday night, it's easier: you don't queue to get in, you get served straight away, the toilets are cleaner, then when you leave you get a kebab the size of a police horse and there's a cab waiting.

"But it's on Saturday you had the best night - it's the reverse of what logic dictates. We are gregarious by nature - humans like to be with humans, especially when your hormones are bouncing all over the place."

But, ever the businessman, Mr Senior is adjusting his business model to take advantage of the way the land now lies.

He said: "What we think is possibly the way forward is the 30 to 55 age group, who do not want to go out round town from place to place, but they don't want darts and dominos either.

"We think entertainment within a restaurant environment will work - a couple of guys on guitar and keyboards.

"We've just opened one in Belfast, Fat Buddha, with a 220-seater restaurant. You need a couple of hundred seats, not 80 or 90, and space for a dance floor.

"We are looking to see how it works, and which boxes it ticks for us, then we will mutate it to become what we want it to be." Mark Jones, chairman of Mr Senior's former employer Ultimate leisure, agrees with his counterpart about the change in the marketplace.

Ultimate said this week that it is building a £75m war-chest to invest in buying more businesses.

He said: "Demographics are such that the number of young people, 21 or 22, is pretty low compared to the burgeoning market in over-50s.

"You have got to tailor your offers to where the market is growing strongest. So it's unlikely we would use this money we are raising to buy a nightclubs business."

Andrew Pring, editor of trade journal Morning Advertiser, said: "We think the licensing law changes that came through in November 2005 have been very, very helpful from the trade's point of view.

"Most pubs have taken advantage of extra hours. They are not necessarily making more money, but the changes to licensing allow them to have more flexibility in their hours.

"And it's nice for customers - to be able to drink after 11pm without having to put up with loud music. Trade is not down as much as you might think but it's true people are not spending as much as they were.

"And licensees realise the economics are very much in favour of home drinking. It's really a very big issue with aggressively low prices in supermarkets."

Geoff Hodgson, managing director of Northumbrian Taverns, which runs former Federation Brewery pubs and clubs, said he had been concerned about the impact of changes to licensing, ever since they were announced.

He said: "I always said 24-hour opening would be a boon for the supermarkets, not the on-trade.

"When you open a pub for an extra hour, you have staff costs, power to pay for, and it's an expensive business. But the supermarkets are open anyway, and are staffed by teenagers on minimum wage."

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Old-fashioned 'boozers' may be the only losers in smoking ban

The smoking ban is the main focus for licensees at the moment, with all kinds of demands cropping up.

Intelligence gathered from Ireland and Scotland is helping the process, but it is all a guessing game until the ban actually arrives in July.

Do you try your best to accommodate your existing clientele with a smoking terrace? Or do you try to attract a new kind of anti-smoking, non-binge- drinking, food-oriented customer?

Most operators will try to hedge their bets until the market settles down, but some won't have a choice.

If you don't own any outside space, will your customers be prepared to leave their pint on the bar while they nip out to the pavement for a cigarette? Maybe not, particularly when your opposition can offer a heated, licensed terrace with a view of the football on a big screen.

Bob Senior, now head of fast-growing Utopian Leisure, said he was confident the smoking ban would not harm his business, since he believes it is the more old-fashioned pubs which will suffer.

Utopian consists of three divisions: one concentrating on mainstream bars aimed at young drinkers, such as Newcastle's Sam Jacks; another operating restaurants, and a third focused on the specialist dance sector, in conjunction with Tokyo Industries in Newcastle.

Mr Senior said: "I don't think the ban will have any effect whatsoever on our trade. In the 18-25 market, if it's a toss-up between boy meets girl or having a fag, the fag loses out.

"The smoking ban will have an effect on small, local boozers, with older guys who associate a pint with a cigarette - particularly the `landlocked' pubs with no outside space."

Mr Senior said his Bar 55 outlet in the middle of what was Swan House round- about has the largest outdoor smoking terrace in the city, able to accommodate 250 people, so he can accommodate even those customers who do still want a cigarette while out on the town. And it may be that the Scottish experience of `smirting' - mixing smoking with flirting - takes hold in just such a location.

He said: "The thing with this business is that people have been preparing for a while. People who've prepared well will be fine; those who haven't will lose out. There will be an initial dip while the market adjusts but then it'll come back."

At the licensed trade journal Morning Advertiser, editor Andrew Pring has been following preparations for the smoking ban with interest - and says his readers know there is no room for complacency. He said: "About 25% of the population smokes and about 50% of the population use pubs, but people don't have to lose those customers if they're clever about it.

"There are smoking shelters and, overall, a lot of money has been spent on outside areas, to make them as pleasant as inside. And there will be more food offers, so people will still come to the pub - and a different crowd, maybe.

"But there are about 10%-15% of all pubs which are very highly dependent on just the `wet' trade - they don't do food, and over 50% of their customers are smokers. They might struggle."

Mr Pring said nightclubs could suffer a little as they won't find it easy, given their premises and security demands, to allow customers to step outside for a cigarette.

But he saw potential in attracting new, non-smoking customers - as long as the environment provided was decent. He said: "Those people who have been away from pubs for a long time because of smoking, are they going to be impressed by a run-of-the-mill, average offer?

"But everyone's trying to be positive and I think standards will rise as pubs get their acts together, to accommodate people who aren't traditional customers."

Geoff Hodgson, managing director of Northumbrian Taverns, which operates pubs and clubs previously owned by the Federation Brewery, said he believed it was down to managers in the licensed trade to adjust their businesses for the new circumstances.

He said Northumbrian was comparatively well off, as it had space at its outlets for external areas, and any additions were being bought only if they provided the same. "We're only taking on properties now where there is potential for an external area with a canopy.

"We will put in the gold standard of external canopies with some form of heating underneath, and some kind of shelf or table for people's drinks.

"We are focused on community outfits, so we are having to address it. It's part of the culture within the pub.

"There are going to be some pubs closing as a result of the ban, but they should have closed anyway, probably.

"In a recent guide to gastropubs in the UK, there was only one in the North-East - we are lagging behind the rest of the country in eating out.

"I remember, when I was 18, the Grapes on Grey Street - where Waterstones book-shop is now - was a men-only bar. People said when that changed it was bad for North-East pubs. It wasn't and neither is the smoking ban."

He said one unlikely result of the smoking ban could be a need for more cleaning. "One experience in Ireland was that they now have to clean their carpets more often, as previously the smell of smoke was masking other odours!"