Wales is preparing to say goodbye to smoking in licensed premises, but will the small Welsh pub survive? TONY HALSTEAD reports
It's impossible to disguise the uncertainty now facing the Welsh licensed trade as the clock ticks ever nearer to an all-out smoking ban across the country.
The decision by the Welsh Assembly to opt for a total public places smoking prohibition is set to hit all facets of the industry. When the ban finally arrives has yet to be determined, but by the end of 2006, it looks almost certain that smoking in licensed premises will be history.
Predictions that as many as one in four pubs across Wales may close their doors may yet prove to be an exaggerated estimate. But the fact remains that hundreds of small Welsh pubs particularly those in rural villages and valleys look set to be hit hard by the forthcoming legislation.
Trade pundits believe pubs under a £62,000- turnover threshold will be the most vulnerable because they will be unable to sustain business through the predicted 15% drop in takings as the smokers desert public bars. There are 3,800 pubs across Wales and most companies and licensees running them will be forced to make big business decisions as the ban looms.
As the full impact of the new legislation sinks in, it seems almost inevitable that pub values will experience the full ebb and flow of the smoking issue. Pubs in the Welsh rural valleys are already closing at an alarming rate and come the smoking ban, it is inconceivable that every pub in jeopardy will have the ability or the local market to launch a new-style food or gastro operation. While city and larger town centre pubs may well ride the storm, rural and suburban Wales looks set for a difficult future.
Agents in bullish mood
Despite this potential pall of gloom over the market, property agents remain in a bullish mood. Bill Evans of chartered surveyor Fleurets' Bristol office, which covers South Wales, admits the pending smoking ban has cast a shadow over the pub property market. But he says there are other positives, particularly around Cardiff, Swansea and its surrounds where licensees have been rushing to take on the new 'Positive Partnership deal offered by brewer and pub operator SA Brain. 'The proposed smoking ban will, of course, have an impact in Wales, he explains, 'but I think that will heavily depend on the type of pub we are talking about. The major city bars will, in my opinion, operate business as usual with the ban having little effect. The more traditional country pubs may look to increase their food offering and transcend into destination food venues to lessen the impact.
Evans agrees the real damage could come in the 'valley pubs around the old mining villages, which attract a predominantly local drinking trade, which accounts for the bulk of the pub smoking population. 'This sort of pub runs the real risk of taking the brunt of the ban and this is where the concern should be focused, he adds.
Evans says there has already been much comment about Welsh pubs already closing at the rate of three per month or changing to residential use. 'The figure may be correct, he continues, 'but I think we can expect many licensees to be resilient in coping with this new challenge and in the future I expect to read articles about how pubs have re-invented themselves in the light of the smoking ban.
In general terms, Evans believes there is room for optimism, witnessed by the positive response to the lease market in Wales highlighted by the Brains initiative. 'We also have an encouraging number of applicants ready to take the 'Innkeeper Wales' pubs that were acquired by Brains earlier this year, so it is not all doom and gloom, he insists.
High number of first-time buyers
Agent Christie & Co also points to positive signs in the market with the company's Bristol office revealing that 50% of its instructions emanate from across the border in Wales. 'Demand still remains high for all price ranges with particular interest for freehold and free-of-tie leases. Buyers are continuing to register for properties in Wales and there is still a high number of first-time buyers coming from outside the area, reveals Christie & Co's Matthew Smith. He admits licensees are concerned about the smoking ban and the grey areas that surround it.
In north Wales which boasts a mix of rural pubs and tourism venues along the coastline around the areas of Rhyl, Llandudno, Conwy and Anglesey attitudes are more positive. Keith Stringer from Christie & Co's Manchester office reports: 'The number of private buyers for north Wales has increased significantly and most of these have substantial private equity available to support their purchase. There has been increasing corporate activity particularly along the main A55 corridor in the region. The Welsh destination coastline resorts also remain highly sought after with demand outstripping supply.
Research by the company shows that over the past three years, sales have produced an average multiple in excess of seven times yearly profit for freehold businesses. Individual sales conducted through the Manchester office are highlighted by deals to sell the Miners Arms, Maeshafn, and the Glan Y Don in Mostyn.
Politicians and civil servants at the Welsh Assembly in Cardiff are now busily engaged in drawing up a Bill which will witness a defining moment for the country's pub industry. There will be victims of the smoking ban nobody for a moment is denying that but real hopes remain that the trade can diversify to mitigate its worst effects and silence the pessimists.