‘2020 will be the year of stability for the pub sector’

03-Dec-2019 - Last updated on 03-Dec-2019 at 17:38 GMT

Ticking boxes: Mark Davies says the UK pubs’ sector economy is healthier than ever

Despite high levels of pub insolvencies over the past 10 years, Hawthorn Leisure chief executive Mark Davies says the current “robust economy” is stabilising the sector.

On top of the recent acquisition by NewRiver REIT to buy and add Bravo Inns to its Hawthorn Leisure pubs arm, the wider sector has seen a busy year in transaction activity.

Prior to this, the sector saw a fall of approximately 7,200 pubs in the past decade and more than 13,200 pubs since 2000, according to Statista.

Davies said: “We've seen a huge supply taken out of the market over the past 10 years – but, of course, that has now been re-purposed.

“We’ve seen a real resurgence in transaction activity in the UK pub sector over the past 12 months and I think it’s highly likely to continue.

“The demand, the supply, the economics in the UK pub sector is now probably healthier and more sustainable that we’ve seen in a long time.”

Main strategy

As reported by The Morning Advertiser, NewRiver revealed net property income from its pubs rose to £13.6m in the six months to 30 September – a 27% increase versus the same period in 2018 when the figure hit £10.7m.

This included net income growth from operator managed pubs of £2.6m – from £6.8m to £9.4m – due to selective site acquisitions and growth capital investment.

Davies continued: “Our main strategy going forward is to invest in wet-led community pubs – and Bravo Inns definitely ticks those boxes.

“In essence, what we’re doing is converting high-performing, wet-led community pubs from a tenanted model into operator-managed models because we get better oversight, better control, product price proposition and people.”

Taking advantage

Davies said food-led pubs face challenges, such as casual dining and food delivery, but wet-led premises could benefit from that.

“We don’t really do food in our portfolio – we decided to go with a wet-led strategy and we’re sticking to our guns on that,” he added.

However, Davies explained among some of Hawthorn’s city and town pubs – some of which are close to railway stations – have large commercial kitchens.

He said Hawthorn is currently conversing with dark kitchen operators who are looking to exploit the massive growth in food delivery.

“This could be a great way for us to use space that’s currently unused and not generating value,” he continued. “We could actually benefit from the disruption in casual dining and food delivery.”

Political support

Davies said: “I think 2020 will be a year of stability, more transaction activity, and hopefully no political interference – just political support.”

However, Davies said the general election coming up on 12 December is unlikely to impact them and the sector in a negative way.

“The government that gets voted in will naturally be favourable in the UK pub sector because it’s been overlooked for too long and I do genuinely think politicians recognise the importance of the great British pub.

“The industry is in a much better position to lobby government and making it realise community pubs are really at the heart of towns and cities in the UK.

“The world’s a better place with them and a worst place without them.”