Discount vouchers and promotional offers have been helping to
shore up trade for pub and restaurant operators during difficult
times, according to analysis of the industry by business advisory
firm Deloitte.
However, strategies that have proved successful in the downturn
could still present challenges for the industry as it seeks to take
advantage of improved economic conditions.
Consumers have become much more aware of, and responsive to,
promotional initiatives such as discounting, coupons and value
offers ('two for one' meals, etc), with consequent margin
erosion.
Alistair Pritchard, associate partner in the Tourism,
Hospitality & Leisure (THL) team at Deloitte in the West
Midlands, said: "Operators need to use promotions wisely, to ensure
that their initiatives genuinely increase sales rather than
cannibalising profit margins on business they would have
anyway.
"As the economy begins to emerge from the recession, a key
challenge for operators will be to wean consumers off these
discount deals. The deals clearly help to buoy up trade whilst
customers focus on 'value for money', but continuous discounting
tends to undermine long term value creation from brand
building."
The UK has suffered its worst economic slowdown in decades, and
job losses, financial insecurities, turmoil across the world's
banking sector and the credit squeeze have dealt many sectors of
the economy a severe blow. In addition, the licensed retail trade
has also been dealing with the impact of the smoking ban,
introduced two years ago.
Mr Pritchard said: "Although there have been hundreds of pub
closures across the UK, pubs and restaurants that have improved
their product offering have done much better than the dire
predictions put forward by analysts when the smoking ban was
introduced in 2007."
Deloitte analysis of like-for-like sales shows noticeable
shrinkage in 2009 for the quoted pubs sector, particularly relative
to the quoted restaurants sector, but with both sectors forecast to
return to like-for-like sales growth by 2011.
"Dining out and socialising may well be near the top of the list
of activities people cut back on when times are hard, but they are
the first to come back on the agenda when there is more disposable
income," he added.
"The key challenges facing all businesses in the sector are how
to adapt to changing lifestyles and shifts in consumer demand, how
to appeal to a new generation of customer and how to bring the
smoker back."
According to the Deloitte analysis, in the current economic
climate consumers are focused on the 'value' of the offering,
creating challenging conditions in which to grow like-for-like
revenues. In the long term, however, operators will want to build a
brand that stands for more than simply 'being cheap'. Price has to
be competitive, but operators still need to have a good offering
and manage their operations well. The impact of the recession
on the High Street, however, means that it is now easier and
cheaper for operators to get space there, to complement
'destination leisure' venues such as retail and leisure parks.
Mr Pritchard said: "Although few things are recession-proof, we
do know that people still want to eat and drink out regularly, to
socialise and to celebrate. Those outlets that can offer a
differentiated drinking and dining experience combined with real
value for money will continue to show sustainable growth but, in
the short term, it is likely that growth will be attributable to a
combination of new site openings, the maturing of recently opened
sites and the closure of underperforming sites."