Leisure and Hospitality
The sensitivity of the leisure and hospitality sector to changes in the economic environment have rarely been more marked than in the downturn caused by the Covid-19 pandemic. Typically bearing high levels of fixed costs and operational gearing, businesses in these areas clearly take disproportionate hits to profitability when there is a reduction in revenue.
Needless to say, four national lockdowns in the UK have been extremely challenging for the leisure industry across the board. Hotels, restaurants, resorts and spas, pubs, theatres, cinemas, night clubs, theme parks, gyms, stadiums and sports clubs all remained closed for several weeks on end or throughout, meaning a dramatic loss of earnings for staff and business owners alike.
A notable fixed cost for operators in these areas is real estate, whether that means rent on a restaurant unit or estate, a commercial mortgage on premises such as a club, or a long lease on a hotel. Very soon after the first lockdown commenced in March 2020, Buchler Phillips began accepting engagements on behalf of several leisure companies, large and small, with unforeseen issues around property costs, not least because their operations had been thriving ahead of the pandemic.
As in our turnaround and restructuring activities, our favoured approach in resolving real estate issues for leisure and hospitality businesses is to find constructive solutions in the best long term interests of both parties in a contract. Unlike several legal advisers, we do not work exclusively with either landlords or tenants. In recent times, agreeing a revised, turnover based rent has been one possibility to keep businesses in this sector operating from their established premises, while remove the risk of a void for landlords.
In more normal times, Buchler Phillips is able to use its industry experience to help plan for obstacles. Leisure and hospitality are ultimately consumer focused sectors where tastes and buying patterns may change. They are highly competitive, with points of difference difficult to establish outside the obvious areas of value for money and superior service.
We are able to help with managing fixed costs as tightly as possible, therefore mitigating the impact of all types of business interruption or unexpected changes in the competitive landscape. Our areas of support include:
- Improving efficiencies, productivity and cost saving
- Hospitality-specific issues regarding tax, VAT, HMRC and PAYE
- Employment issues
- Cash flow optimisation
- Asset reviews
- Leasing and finance options for equipment