Speaking up

London & Edinburgh boss Alan Bowes believes it's high time the industry organised itself properly and presented a united front against the many threats facing it. He spoke to Hamish Champ.

For the record, Alan Bowes is still passionate about the British pub trade. That this needs reiterating becomes apparent when one looks at the evolving nature of his London & Edinburgh Swallow (L&ES) Group - neè London & Edinburgh Inns. But more of that later.

Recently L&ES, already a significant hotel operator as well as pub company, has become an even bigger player in the UK hotel sector. This is particularly so in Scotland, where it is now the largest operator.

L&ES has been implementing an aggressive acquisition strategy, recently buying six sites for a reported £30m, including the Gleddoch House Hotel on the Isle of Skye and the Carnoustie Golf Hotel & Resort - situated adjacent to the world famous championship course where next year's Open will be played.

Funding for these acquisitions appears to be readily available thanks to Alan's business partners, property investor Tony Khalastchi and Mark Pears, he of the Pears soap dynasty. A canny use of sale and leaseback deals - in which L&ES's profit from a particular pub outdoes the guaranteed return for the landlord - also helps matters.

Mysterious ways​

There has traditionally been an air of mystery hanging over L&ES, but Alan takes the view that he is less a maverick, more an innovator and able to speak his mind, "in a way some of those running plcs can't".

The way he works stumps many in the sector. Jarlath Hale, director of BCW Group, which works with L&ES, says: "Alan would be seen as unorthodox in his approach from a pure strategic perspective. People can't work out his way of doing things but the point is he understands the pub market from all perspectives. He is a deal doer, and while others hesitate Alan will close a deal."

Sophisticated industry types remain baffled, but this works to his advantage, says Jarlath. "Alan takes a commercial view. He built his pub estate rapidly and has improved it over time by getting quality people and systems on board."

His key skill is being able to acquire where it suits, adds Jarlath, and leave his management team to get on with the operational aspects. "Unorthodox? Yes, but never underestimate him," he concludes.

The image of L&ES has certainly moved on in recent times. The company now owns 150 hotels and around 700 pubs, 570 being tenanted or leased houses. The smart money is made in the former, says Alan.

"As a group we made £12m profit last year [on turnover of around £120m] of which between £7m and £8m was accounted for by the hotel division. Around 80 per cent of our sales now come from hotels," he says.

Current trading on the pub side is between four and five per cent down, he says, "but then most people are suffering". With the hotel part of the business growing all the time, the contribution ratio is likely to shift even more.

So does this mean that pubs are now a sideline for the group? Alan is predictably frank. "As we speak at the moment, without a doubt," he says. "We've spent more than £100m on hotels this year and I make no excuse for that."

The reason? Prices. "I think pubs have priced themselves out of the market, and when they are available they're in groups, it's someone else's bottom end that's being churned. Individual pubs at a decent price are like rocking horse shit," he says, colourfully.

"A pub's price today versus its earnings before interest, tax, depreciation and amortisation (EBITDA) is getting out of hand," he adds. "People are paying the equivalent of £1 for 8p of EBITDA. We wouldn't be prepared to pay beyond 10 times EBITDA. To make decent profits you've got to be getting in at this level. I can understand some of the players coming into the market, especially where there's a property angle to go for, but what I can't understand is anyone coming into the high street at these prices. Where's the alternative use coming from?"

This is not to say L&ES is above buying pubs any more. But certainly the scale of acquisitive activity has slowed to a trickle in recent years, given the new emphasis on hotels. Those pubs he and his backers do buy these days have to be special, such as a 20-room food-led establishment near Falkirk in Scotland being acquired for £3m.

"I still buy the odd pub, but it's got to be food-led and with a few rooms," he says. "I never rule out buying wet-led pubs, indeed we bought one recently. But one pub in six months is not a lot compared to the levels we used to buy. We're selling more than we're buying these days."

The smoking ban​

Part of this reticence stems from what he sees with somewhat doom-laden eyes as the pub sector's dire prospects throughout the country, thanks largely to the proposed smoking ban. It is an issue that riles Alan to the core.

While his attempts to have the ban halted in Scotland are likely to fall on stony ground, he hints that instead of going through the same process south of the border he may take his case to the European Court of Human Rights.

His stand over smoking is less about changing legislation - although he would if he could, clearly - than it is about asserting freedom of choice by confronting a government he believes is obsessed with spin and being a "nanny state".

Rather than pussy foot around, Alan - a fan of Marlboro Reds himself - argues the habit would be better outlawed. "If tobacco is as bad as they say, make it a Class A substance and take it out completely," he argues.

The Irish experience, where the government says only a handful of pubs have closed, cuts little ice either. "We believe the picture there is far worse, from pub closures to people's health, with smoking at home on the increase," he comments. "But the ban there is, predictably, hailed as a great success. The government isn't going to flag up the downside for obvious political reasons."

Meanwhile, the authorities' delay here in issuing guidelines over what can and cannot be permitted to mitigate the impact of a ban in England annoys Alan still further. "There is no leadership from this government regarding what a ban will actually involve."

Anticipating everything, L&ES's pubs will increasingly feature alternative offers - such as dry cleaning services, Indian takeaways and hotel booking facilities - as well as outdoor areas for smokers to compensate for the 15 to 20 per cent dip in trade Alan foresees. "The days of the pub, especially the community pub, just being 'a pub' are over," he says. "Those that have the additional services that can attract customers will be the ones that win."

A passion for pubs​

So then, back to his passion for the pub sector. Alan wants to see more people making a stand for the country's pub culture. "We really need to unite as an industry, all of us - pub operators, brewers, pub owners - and stand up for our industry. We should take a leaf out of the gaming industry's book and lobby the government more effectively. It worked for them," he says.

Such a move would involve a radical shake-up of the industry's representative organisations, Alan believes. "We need one trade body. The Association of Licensed Multiple Retailers (ALMR) does a good job with the few shillings it's got in the coffers, but it's really only pissing in the wind in terms of the industry's problems."

Alan says if he had his way he would merge the British Beer & Pub Association and the ALMR and move forward with one trade organisation. "This is about saving the pub," he points out. "Everybody wants that. More people need to put their heads above the parapet and be prepared to put the message across about how great the British pub is."

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