How will operators resolve the challenge of social distancing?
It looks like we have dodged “hazmat suit” hospitality, but the industry will have had 10 days to open safely following the announcement from the Prime Minister on 23 June. Martin Lewis’ summary captured it best: “Hairdressers can open, beauty salons can't. Cinemas can open, gyms can't. Pubs and restaurants can open, swimming pools and water parks can't.” He also queried the science - and one can question the logic - but either way, we have a staggered re-start in our sights.
While Oliver Dowden, Secretary of State for Sport (among others) shared the government’s “aspiration to reopen gyms and leisure facilities in mid-July”, this delay is frustrating for both customers and operators, who sensibly reflect that it is easier to monitor safety measures in a gym than a pub. In a gym, customers can book time slots with strategically spaced workstations and regular deep cleans in the closed periods. The Gym Group has mentioned outgoing costs of £10m per month to run the business – they need to open and the public needs them, for physical and mental wellbeing.
Restarting hospitality is in all our best interest: 25% of UK’s GDP drop in April was due to the hospitality sector being on hold, and, as Head of the Hospitality Union, Jonathan Down proudly states: "Hospitality is the UK’s 3rd largest private employer, creating 1 in 8 new jobs and 9% of all jobs – often first jobs for young people. Its economic contribution is £130bn annually (bigger than automotive, aeronautics and pharmaceutical combined) with tax receipts of £39bn."
The new “1 metre plus” rule enables scenarios where 2 metres is not possible if there are mitigating factors – such as masks and screens – together with table service and registering. This appears to be a guidance (not legally enforceable), so I have no doubt our entrepreneurial UK hospitality industry will find ways to embrace these conditions and make customers enjoy the experience.
Hospitality is an art not a science, and confidence is everything. “We want [customers] to feel that they are in a nice buzzy environment, having fun… We don’t want them to feel they’re going into hospital and about to be operated on,” said Des Gunawardena of D&D London in the ES. How customers come back and how they are made to feel, may quickly be eroded with onerous (and possibly illogical) measures.
In the Evening Standard Mark Davyd of Music Venue Trust has said only 13% of grassroots music venues could open with 2 metre social distancing, but it would be financially ruinous to do so. While the distance has been reduced, live music is still not to open on the 4 July “89% [of fans are] very eager to return to venues” (of 28,640 fans surveyed). The demand is there. Echoed by Cushman & Wakefield’s international teams (Beijing, Hong Kong, Seoul, Paris, Berlin) where anecdotally many of our colleagues are noticing F&B footfall is back to similar pre-lockdown numbers.
Alfresco Revolution
In the UK we often longingly look to the alfresco lifestyles of our Mediterranean cousins and think they won’t work here, but we are less restricted by the weather than we realise. You only have to see how willing people are to support their favourite sports team on the terraces during the winter months. Note how our Low Countries counterparts have evolved and how they have dealt with reopening of F&B. We are restricted by a historic servitude to the car and draconian, outdated licensing rules for fear of public disorder. This is our chance to evolve.
New York has now enacted it; with Mayor Bill de Blasio signing an executive order on Thursday 18 June launching the 'Open Restaurants' plan for outdoor dining. Removing bureaucratic red tape to allow restaurants to serve customers with outdoor seating options from parking spaces, gardens, and patios and pavements. In July, they plan to expand outdoor dining to open streets temporarily closed to traffic. This will allow 5,000 (of 27,000) restaurants to reopen, bringing back 45,000 jobs, de Blasio said.
In London, Shaftesbury and Soho Estates are planning a Soho Summer Street Festival, with timed temporary pedestrianisation of the streets (weekday evenings and weekends from midday) to be filled with vibrant restaurant and bar seating during these times. The exciting project is supported by Westminster City Council (full “proposed intervention” list), but given the short notice until launch, can the restaurateurs properly prepare?
VAT
Boris made no mention of any VAT cuts. I hope we follow Germany who cut the sales tax restaurant guests pay on food from 19% to 7% drawing sales back to pre-lockdown by 30th May (Sky News).
Source: OpenTable
The FT suggested Rishi Sunak is considering a lower VAT rate for the tourism sector — including pubs, restaurants and hotels. We keep our fingers crossed.
A Silver Lining
While lockdown has sadly seen the loss of institutions from Le Caprice, India Accent, HIX/Tramshed, the Ledbury, Rivington, Texture, Siren and EAT together with Whalburgers; the pandemic has merely accelerated the changes forecasted over the next 3-5 years. A restaurant is only as profitable as the amount of people it can physically cater for, and while some locations assist a brand, F&B operators are reluctant to take a loss for a prime site, note Wagamama, Chipotle, and Wahaca in Soho are all available. So, leasing a shell developers spec space to a restaurant on a 25 year lease and forgetting about it, only to collect the rent, may now seem naive. From an owner’s perspective, the restaurant must interact and work with everything else nearby, regardless of whether it is a stand-alone asset or part of a centre or estate, requiring intense asset management.
Lockdown has shown us what we missed – our basic human need for social interaction accompanied by great food and drink. Chris Miller of White Rabbit eloquently spoke in City AM of the silver lining. “Downturns are where most successful hospitality businesses are made… rents are likely to adjust down and landlords will provide more favourable terms to attract the few surviving active players in the market. Expect to see capital contributions and turnover rents to attract best-in-class operators.” The question is: does the property world know this yet, and if they do, can they do anything about it?
