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07 July 2017 | Pubs

North West hospitality businesses remain positive despite cost pressures

In a briefing hosted by Pinsent Masons and Christie & Co in Manchester on Tuesday 27 June, North West hospitality operators, investors, licensing and valuation experts spoke of numerous opportunities despite the onslaught of cost pressures that the pubs, restaurants and hotels sectors have been forced to take on in recent months.

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This comes in light of the rise in National Living Wage, business rates and pensions auto-enrolment amongst others which all came into force in April 2017.

In the panel discussion, immigration in light of Brexit was a particularly hot topic. While it is thought that 15% (700,000) of employees in the hospitality industry are foreign nationals, Peter de la Perrelle, Managing Director of Tower Hotel Management looked at staff nationalities from his eight hotels which mainly span the North West and found that the figure for his operation was in fact 50%. He explained that many EU nationals start in housekeeping positions to build their language skills before filtering into the wider economy which brings unlimited benefits, and that if this supply of workers dries up, the UK will have a big problem.


Ryan Lynn, Christie & Co

Technology will also play an increasing role in many hospitality businesses as they seek to cut costs in light of increasing outgoings. Jeremy Roberts, CEO of the North West based Living Ventures Group said that the IT business has improved operations hugely and is becoming cheaper to buy into. There are more online reservation systems and smart paying tools which enhance accessibility and efficiency offsetting a small proportion of frontline staffing costs, but the industry is still far off being able to rationalise staffing significantly – particularly for back of house roles like housekeeping and food preparation.

Kieran Lawton, Investor Director of Palatine Private Equity LLP said that in terms of acquisitions, if licensed businesses still demonstrate that they’re scalable and cash generative then investor interest in these sites remains. Consumer spending is continuing at a steady rate and eating and drinking out habits are unlikely to change so while there are sites, debt and exit options available, the market will continue to move despite Brexit and other external factors.


Neil Morgan, Christie & Co

Neil Morgan, Managing Director – Pubs & Restaurants at Christie & Co comments, “The message is clear: everyone is in the same boat so businesses will continue to thrive as long as operators are proactive and prepared to adapt.
 
“It is also clear that many operators feel confused by new initiatives such as the Apprenticeship Levy which when used properly, can add up to £5,200 to the bottom line of a hospitality business. More explanation and guidance is needed in a sector which is resilient but still needs support to thrive.
 
“Through Christie & Co’s annual Benchmarking Report which we’ll launch with the ALMR on 11 July, we continue to listen to businesses’ biggest concerns and provide evidence of how the licensed industry landscape is changing to enable operators to react and develop in these key areas.”
 
Ryan Lynn, Associate Director in Christie & Co’s Manchester office comments, “Despite the number of cost pressures, we are still seeing a very high demand for good quality hospitality businesses throughout the North West from UK based and foreign buyers. We predict that average prices will remain strong in 2017 and with hotel room supply increasing by 10% in Manchester and by 8% in Liverpool by 2019, it is clear that the licensed sector is continuing to grow at a steady rate.”
 
Amie Norris, Senior Associate at Pinsent Masons comments, “This isn’t the first time the hospitality sector has faced a challenging environment. What is clear is that the sector as a whole is resilient and adept at dealing with the challenges and changes it faces. Whilst there will no doubt be some operations that struggle to deal with the challenges of 2017 and beyond, there is also an opportunity for the stronger businesses to adapt and grow.”