Last orders: why your favourite bars are closing
A string of late-night administrations makes for grim reading – but it's not closing
time just yet.
For those of a certain – increasingly close to distinguished – age, it has been a
rough few months. A string of bar chains appointing administrators or
restructuring has marked the end of an era.
First, there was Antic Group – owner of Dogstar in Brixton, Tooting Tram and
Social, and Balham Bowls Club. A few weeks later it was the turn of Revolution
Group, fondly (or not) known as Vodka Revs, which said it would be shuttering
11 locations. Earlier this year the Pryzm and Atik nightclub chains shut their
doors, while Wetherspoons has been closing branches for the past two years.
These are just the headline-grabbing names of a long list of bars, pubs and
clubs that have called it a night over the past few years. More than 16,000
premises have shut since 2020, a decline of 14%, according to CGA and
AlixPartners’ Hospitality Market Monitor.
Changing drinking habits are largely to blame, though so too are the inflexible
financial structures of expansion for many chains. But it’s far from over for the
sector, and while many bars have closed, newly growing demand in key areas
and subsectors means they can still form an important part of a landlord’s
leisure offering.
Structural shifts
Speak to any leisure operator and the first terms out of their mouths are “Covid-
19” and “working from home”. These two have combined and fundamentally
changed how the night-time economy works.
In addition to losing a huge chunk of income, many bars have now seen a shift
in when they take their cash – and those unable to adapt have suffered.
Adam Coffer, founder and managing director of EPF Group, says: “Covid-19
had a huge impact, while the subsequent work-from-home culture had a
massive effect on city centre bars, exacerbated by a pretty crippling series of
rail strikes.”
These troubles are being further exacerbated by longer-term structural
changes.
Behind sensationalist headlines, the younger generation is drinking less – with
39% of those aged 18 to 24 not drinking alcohol at all on a night out, according
to a recent study by the Portman Group and YouGov. This cohort is increasingly
deterred by high prices and the health impacts of alcohol.
And pub closures continue apace – more than 100 have closed their doors over
the past 12 months – while there has also been a shift in some areas to more
curated town centres, which often seek to move away from the anti-social
behaviour associated with late-night licences.
However, this isn’t the entire story, as many bars and leisure establishments are
performing well. And, as with the retail sector before it, bars focused on
delivering a quality, consumer-led offering are still also enjoying profits.
According to Savills, the decline in late-night licences being issued is actually
leading to pent-up demand in the sector.
“It would be incorrect to talk about bars and the late-night market holistically,”
says Coffer. “There are a number of factors feeding into the downturn, and
there are still growth stories. There are very good operators out there – but
there has been a flight to quality, the same as in the fast leisure sector.”
The retailer’s curse
Beyond – or perhaps behind – the structural changes, some bars and chains
have been a victim of their own success, by expanding quickly and losing their
connections with customers.
Coffer adds: “Some operators, bought or run by larger companies, also lost the
all the important connection with a consumer, and it’s incredibly important to
know what the local consumer wants.
“It’s comparable to, say, a Waterstones, which curates all of its stores
individually – so why wouldn’t it be the same for a bar?”
Expansionary business models and sales to investors meant less flexibility to
deal with the emergencies and changes brought about by Covid-19 pandemic.
In much the same way that successful retailers scaled up through an injection of
private equity, bars and pub chains that do well are often bought by financial
institutions which inevitably have tighter financial priorities. If profits start to
slide, not only is the business no longer flexible enough to re-attract footfall, but
tighter margins due to debt means there is little wiggle room for re-investment.
Still a valid portfolio addition?
Despite the negative headlines, there is still demand in the leisure sector, and
alongside the flight to quality there are signs of a wider burgeoning recovery.
While closures have been the norm for some years, the latest statistics from
CGA and AlixPartners’ Hospitality Market Monitor showed a 0.5% increase in
the number of licensed premises between Q1 and Q2 2024.
Karl Chessell, director, hospitality operators and food, EMEA at CGA says:
“Hospitality may never fully return to its pre-Covid-19 size in outlet terms, but it’s
clear that it is now back on a much surer path.
“While it’s too early to be sure that hospitality’s downward trend in outlets has
bottomed out, alongside solid sales growth over the first half of 2024, these
figures indicate the brightest outlook for the sector for some time.”
Research from Savills points to a growing demand for competitive socialising
establishments (bowling and darts for anyone over 35; axe-throwing and
escape rooms for those under), with a 455% increase in the number of comboattractions.
New data also suggests that pubs and bars experienced an 11%
increase in individual spending this summer, largely driven by high-profile
sporting events.
Savills adds that landlords are becoming increasingly aware of the
complimentary uses of licensed leisure to support existing assets, in the right
context.
“The pub and bars sector is performing well, with the number of premises now
stable,” says Siân Tunney, head of leisure and trade at Savills.
“It is clear that consumers are keen to gather together to socialise and enjoy in person experiences. Additionally, we are seeing landlords recognise that this
complements office, retail and residential uses.”
So, while the sector is still reeling, at the end of the day (also known as cocktail
hour) and despite pandemics and anti-social behaviour, the night-time economy
still forms an important part of any high street – and especially those struggling
to let space and drive footfall.