Publicans are viewing the new year with “cautious optimism” despite the rollercoaster of COVID-19 lockdowns, according to CBRE Hotels’ National Pubs Director Paul Fraser, who has given his view on the keys to successful pub sales in 2021.
“Back in March pubs were shut for at least three months and even longer in Victoria,” he said. “Publicans were worried that they would lose local patronage when they finally got back up and running, but a loyal customer base and a fresh outlook from publicans has seen strong trading results across the country once lockdowns finished.”
Fraser said publicans have been able to reset their business model in 2020 and have relied less on price discounting and more on providing a good customer experience.
“A hands-on approach, knowing your customer and providing excellent service will all be essential to stay ahead in 2021,” he said.
“As a publican once said to me years ago, the best advertising you can do for your pub is put an extra staff member on. That lift in service is what patrons will be searching for as disposable incomes reduce. Know your customers, know their name and know what they drink – it really needs to be that simple.”
In relation to regional pubs, Fraser (above) said this sector seems to be “traveling well overall at the moment versus prior years though it is very location specific”.
“The holiday destinations in each of the states have certainly seen an uptake in patronage which is fantastic to see,” he added. “With international travel currently curtailed there is a real opportunity for regional towns to continue to capitalise on this and ultimately the statistics speak for themselves.
“On average, 11 million Australians go overseas and 10 million international travellers come to our shores, so effectively one million more people will have money in their pockets in 2021 to spend in Australia, which should be an exciting opportunity for the hospitality industry.”
However, he cautions that there are fears that the strong bounce back seen in the second half of 2020 was the result of the huge government stimulus provided through Job Keeper, one off payments and super contributions.
As we start to get back to normality without government stimulus he believes disposable income will decrease, making it a difficult road ahead in hospitality.
The state of sales around the nation
Pub sales have ended the year on a high note, with transactions over the past six weeks valued at more than $170million, including the record purchase of Sydney’s Narwee Hotel for about $45million by Iris Capital.
However the Victorian hospitality industry has “really been decimated” by COVID in 2020.
“Whilst the industry has bounced back with the easing of restrictions it is still not near where it was and with Christmas upon us – and the lack of Christmas functions that were booked earlier in pubs – revenue is down considerably versus last year.
“However, if we can keep on top of COVID until we get a vaccine though there is no reason why the industry – as robust as
it is – can’t bounce back over the next 12-18months.”
Fraser said CBRE believes that NSW will be strongest market from a pub sales point of view.
“There has been considerably less consolidation in NSW than other markets which provides a higher level of transactional fluidity than in states like Queensland,” he said. “However, we believe the banks will be very selective on who they lend to and this may cause transactional volumes to be a little subdued versus prior years.
“Also, while Western Australia has done a fantastic job in relation to containing COVID, the fact that WA pubs don’t have gaming machines is a real missing revenue stream for buyers who now see just how fragile businesses like pubs can be. We would expect that lending on pubs without gaming and only leaseholds with rental obligations in 2021 is going to be challenging.
Currently there are more than 45 pubs for sale in South Australia, 80% of which are leasehold.
Fraser noted that buyers and banks will need to consider whether pandemic clauses need written into new
leases for pub sales.
“Solid freehold going concerns with strong gaming in suburban areas with a good balance of land and multiple income streams will always be highly sought after,” he added.
“We do, however, believe that solid pubs showing consistent past earnings in rural areas are where the opportunities lie. These pubs can often be bought at softer yields and the right ones can perform well with some capital investment. Solid owner operators with a balance sheet and lenders ready in the wings are well positioned to take advantage of the next couple of years in the industry.”