Businesses in the trade will struggle to remain viable if sales don’t reach near ‘normal’ levels once the coronavirus safety measures are lifted, according to the weekly Hospitality Leaders Poll launched by HIM/MCA Insight, a division of The Morning Advertiser’s parent company William Reed.
The poll of almost 700 business leaders from across the eating and drinking-out sectors, including pubs, which accounted for 382 of the respondents, painted a stark picture of how little money the on-trade can lose before struggling financially.
- 44% of all single-site hospitality businesses would need less than a 10% drop in sales to remain profitable
- A third of all pubs and restaurants would become unprofitable if sales dropped more than 10%
- Just 4% of hospitality businesses said they could remain profitable with a 41% or more sales drop
Source: HIM/MCA Insight Hospitality Leaders Poll
Some 39% of pub respondents said they would only be able to handle a maximum of a 10% drop in sales, 35% said they could handle up to a 20%, while 16% claimed they could handle up to a 30% drop in sales to remain viable. Just 5% said a drop of up 40% was viable and another 5% said 41% or more was possible.
Sales drops were likely to come from an enforced reduction in the number of customers allowed in a pub once the trade is allowed to reopen under physical distancing rules, a scenario likely to come into place later.
One operator who is a tenant of a national pubco said: “If enforced social distancing was to occur, I cannot see how we could operate profitably.”
They continued: “Furthermore, our landlords are yet to offer any rent reduction, and should shutdown be more than two months, we will be in considerable debt before we reopen.”
A pubco director said that during pre-lockdown days, it was a struggle to remain profitable, even when capacity was full.
“It's hard enough to make a profit when you're trying squeeze in as many customers as possible,” he said.
“The idea that you can operate effectively or profitably with one hand tied behind your back is farcical.
“If the Government wants pubs and restaurants to open under social distancing measures, then something radical needs to happen to our cost base to allow this, ie, a rent holiday and zero VAT for the duration. If that happens, then we may just have a chance.”
Putting the situation further into perspective, the general manager of a single-site operation told The Morning Advertiser that current social distancing guidelines would mean their pub could only allow 14 people in at any one time, despite having capacity for over 45 seated customers.
However, while some in the trade seek to understand the minimum number of covers their sites will need to remain profitable, others question whether consumers will be confident enough to leave the safety of their homes to visit a pub.
A second single-site operator said lost profit will never be recovered and, therefore, the sector would need long-term financial support in the form of continued grants, Government schemes such as furlough as well as rent holidays and help from suppliers.
However, such requests could be controlled to a certain extent, he said, but added the biggest issue was whether customers would ever come back to the trade in the same numbers seen prior to lockdown.
“The big unknown is what the public’s attitude to visiting pubs/restaurants will be once released from probably the last stage of easing the lockdown,” he said.
“If we lose zero to 20% of turnover, we would survive, but where on that line is unknown. Operating on anything above a reduction of 20% plus would result in the pub being a loss-making business and not worth keeping opening on those fixed costs.
“This situation will vary immensely depending on the type, location and layout options of the venue. We need a rent holiday.”