COMMENT: Living in “Interesting Times”

Economically and politically the late night sector has witnessed some pretty seismic shifts recently with more challenges to come.

In 2009, the credit crunch has not only hit the bottom line of late night businesses (as it has right across most of the retail sector) it has also meant that the crucial business of borrowing money from banks has either been very difficult or very expensive - or both.  Noctis members are generally running businesses (large capacity, often town or city centre) which require a pretty demanding regime of refurbishment.  The customers in our member’s venues are often similarly demanding: for premium prices, they expect premium surroundings.

In our sector (as in the licensed trade generally) over the last twelve months there has been a raft of closures and an increasing trend towards “pre-pack” administrations.  There is every indication that this trend will continue into 2010 and possibly beyond.  “Pre-packs” have been an unpleasant necessity for some businesses as they allow profitable parts of estates to keep trading – thereby securing ongoing revenue and safeguarding some jobs.  For the creditors, they are obviously less palatable and have seen some very hard times for many operators in associated trades.  The fact however remains that in these times of economic hardship and restricted consumer spending, businesses cannot afford to carry many unprofitable units within an estate.

The turbulence in the economy has had a clearly defined knock-on to consumer spending in the late night sector – as it has in other parts of the licensed trade.  Now value is paramount.  This, for the late night sector, has meant that the good venues which are managing to match their customers’ expectations - by delivering the right brands and good customer service - are being rewarded by repeat custom.  Others have been forced into heavily discounting which – as well as reducing profit – holds a raft of associated problems, not least in the weakening of relations with local police and councils.

The operators, who by lack of speed in an ever-changing market, judgement, investment or the right clientele (or a combination of aforementioned factors) are not managing to retain trade, are really feeling the icy winds of recession.

Providing reasons to come out such as live music, clever themed events and enticing celebrity personal appearances are all proving to be useful drivers of footfall when the offering is presented well. The main stumbling block however for some operators is that they need investment to provide these new services at a time when their instincts (and their Financial Directors) are telling them to trim the fat.

Faced with additional competition, the supermarkets, as you might expect have re-doubled their efforts to chase our custom. Many big nights out have been replaced by cosy nights in and the supermarkets have been canny (as usual) in pitching a solution to their nervous customer base.  For the clubs and bars, the now vast price differential between on and off trade alcohol has further exacerbated the growing trend for pre-loading, has pushed the night out even later and made it even more challenging - for some operators.
 
The response of many legislators (both locally and nationally) has not been anything like as sympathetic or understanding as it needs to be.  Ongoing programmes to tackle alcohol related violence and disorder have caused many operators to have difficult conversations with local police and council officials about their legitimate and necessary promotions policies. This is proving to be a costly distraction for some responsible operators who need to be able to generate new business in a difficult market.

In Oldham during the summer of 2009, the council brought a blanket review of 22 licensed premises in a heavy-handed attempt to resolve their real and their image problems. This local situation, as well as garnering large amounts of press coverage, served to highlight a wider national issue – the battle for custom between the on and the off trade.  In Oldham, Noctis is helping to try and bring good sense to bear in creating a mediated solution to this particular local situation, but it has been fraught and extremely time-consuming getting agreement. Unfortunately 2010 is almost certain to see more of this kind of knee-jerk civic enforcement activity.

If there has been fluidity and considerable uncertainty in terms of trading, there have been similar conditions visible on the political front.  The New Labour meltdown has created a policy vacuum which a whole host of pressure groups are enthusiastically trying to fill.  Aggressive forces advocating much greater law enforcement and more radical public health measures have gathered their troops to prepare for major battles in the immediate future.

The BMA’s radical document, “Under the Influence” (which called for an advertising ban on alcohol) and the Tories suggestion of late night levy to pay for more enforcement later into the night, are two such symptoms of hardening attitudes towards the late night sector in particular, and the licensed trade in general.

Calling for the head of the fictional bogeyman commonly known as “24 hour drinking” could be seen as an early skirmish in what will be a pretty bitter war over the coming years. Noctis’ response going forward is to take some of the heat out of the pumped up machismo rhetoric.  With a pilot community engagement project – dubbed “Unight” in prospect (based upon the successful Lothian pilot) with Diageo and another forthcoming major Social Norms initiative with AB-Inbev, aimed at student attitudes to alcohol, going forward, we are looking to create genuine partnership out of the sound and the fury of current debate.

The political vacuum will be filled at some point in the first half of 2010 with the General Election and after that we may begin to see real green shoots of economic recovery.  The green shoots will appear, one suspects, not because the Tories are infinitely more gifted, but simply because they are not New Labour.

The late night sector will also have to tackle high-profile attempts to combat “Binge Britain”.  A new government will inevitably bring new challenges, yet it also presents new opportunities if we as an industry can convince the incoming regime to work in collaboration.  New legislation from the incoming government may not reach the statute books in 2010, but it is clear from the previously mentioned Tory announcement, that tackling Cameron’s “Broken Britain” is bound to have a dimension which relates directly to the late night sector.

2010 will also see both music licence agencies PPL and PRS try to recoup lost revenue from illegal downloading by “restructuring” their tariffs.  This move is obviously going to be viewed suspiciously by the whole of the on-trade as a move designed to increase fees.

The considerable fluidity, uncertainty and legislative challenges ahead will mean in 2010 the late night sector (as with the rest of the on-trade) will see another challenging year.  On the bright side, a change of government may bring opportunities to build and strengthen effective partnerships which, in turn, will help us continue to build positive messages about the late night sector.