Pubs selling food escape sector sales declines, finds survey

Released this week by the real estate adviser Jones Lang LaSalle Hotels, the annual survey revealed an on-going decline in the sector, with the number of weekly pub closures remaining high at 25.

In total, 45 per cent of pub owners reported a fall in sales over the past year. Wet pubs were particularly hard-hit, with 66 per cent reporting a decline. In contrast, 63 per cent of pubs selling food reported an increase in sales.

Pubs: business challenges​

The main factors noted as contributing to the tough environment were the smoking ban, tax increases, and the government drive for healthier lifestyles.

Pub investors also highlighted the fall in disposable income as being a main concern for the market, with 34 per cent expecting this to continue into the coming year. Other concerns included competition from off-trade sales and the difficulty in securing finance.

“Financing remains a real concern; there is little appetite for banks to provide cash due to perceived risks. Loan-to-value ratios are typically at only 50 per cent, which is stifling growth in the market,” said Harry Hawksby, director in the Licensed Leisure and Hotels division at Jones Lang LaSalle Hotels.

Positive outlook​

However, despite the continuing troubles facing the sector, 30 per cent of investors surveyed said they expected “notable” growth in the next two years.

“Whilst conditions remain challenging for the UK public house sector, the medium-term outlook is positive, especially in London and the South East. The number of public houses closing weekly has also fallen from 37 to 25. There is a general sense of optimism, with the glass being half-full rather than half-empty.

“​The next twelve months are likely to see the market continue to polarise, with public houses which offer food performing much better than their traditional alcohol-only counterparts.”

Pub locations​

As well as the food offering, a pub’s location is also key to its success, said Hawksby.

Pubs in the South of England generally performed better than those in the North, Wales and Scotland. Confidence in the London market in particular remains high, with 39 per cent of investors identifying the capital as having the strongest potential for real estate growth within the sector.

“If a public house is well located, well run and offers something extra such as food, the outlook is relatively positive,” said Hawksby.

“As the market continues to improve we could see an acceleration of public houses being offered for sale as the banks and institutions begin to exit properties which are currently being run in administration.”