Froth blowing off pub sales as staying in is the new going out
IT was never going to be a great year for the pub sector, with the smoking ban looming over publicans from the start of 2004. Despite the protests from pub owners, the ban came into place in late March.
However, several other factors conspired to make it a tough year. A change in drinking patterns was already in motion before the smoking ban came into effect, with a perception of poor value for money contributing to more home drinking.
Figures published earlier in the year showed the number of Irish people who visit the pub on a weekly basis has fallen significantly in the past nine years, with only 43pc now going every week, compared with 53pc in 1995.
Research from Behaviour and Attitudes (B&A) carried out just after the introduction of the smoking ban reveals that the proportion of people who limit pub visits to once or twice a month is on the rise.
As drinking in the local pub declines, enjoying drinks at home and at parties has increased, with the off-trade winning custom. Retail sales figures for the first half of the year showed that bar sales had plummeted 9pc, giving clear evidence that publicans were being affected.
Large Dublin group Capital Bars outlined some of the challenges facing the pub business when it filed accounts last autumn. The group, owned by Liam and Des O'Dwyer, owns modern superpubs such as Zanzibar and Cafe en Seine.
According to their financial statements, bar sales are falling partly due to clampers in Dublin, poor public transport and "negative publicity" about drunken disorder in the city. The company's focus is now on tight cost controls.
Another major publican, Louis Fitzgerald, said that he would complete existing pub projects but would hold off on new bar investments until the current uncertainty passes. The latest café/bar in his 21-strong chain, The Lotts, off Middle Abbey St, which hopes to attract Luas commuters, opened in September.
Publicans outside Dublin were extremely concerned about the smoking ban, and Vintners' Federation of Ireland president Seamus O'Donoghue said that publicans who have entered the trade in the last four or five years are in a "delicate position". Those with high borrowings were described as "vulnerable" as pub revenues felt the pinch.
Last year kicked off well, though, in terms of pub sales, with the majority stake in the Thomas Read group being snapped up by the financier Paul Connolly for 30m as founder Hugh O'Regan opted to focus on hotels. Another pub which sold for an impressive price in the early part of the year was Thing Mote on Suffolk St, which sold for 5.24m.
But in the second half of 2004, the various problems facing the sector began to translate into actual pub premises sales.
Industry insiders admit that there were some "stress sales" in the second half of the year, with some publicans keen to exit the market as the going got tough and uncertainty continued. A number of pubs failed to sell when they went to auction, although some were sold afterwards.
Tony Morrissey, of Morrissey Auctioneers, said that he expects 33 pubs will have been sold in Dublin in 2004. This is an increase of 20pc on 2003 - when 27 pubs changed hands - and does not include the ten units in the Read Group. Mr Morrissey believes that taking the Thomas Read sale in distorts the bigger picture for trends in pub sales.
The number of pubs which were sold is a big improvement on the previous two years, when just over 20 pubs were sold in the capital. However, the number is still below levels seen in the late 1990s, when activity in the sector soared.
Total prices for 2004 will have been around 108m, compared with 84m for 27 premises in 2003.
Mr Morrissey said that there had been some softening of prices but that this was not directly related to the smoking ban and was in line with trends seen in the previous two years.
He estimated that pubs were now selling for somewhere between two and three times net turnover, although there were exceptions. In the late 90s, pubs going for more than three times turnover was far more common.
John Ryan, of CBRE Gunne, said: "There always has to be a readjustment period - the good ones (publicans) have their heads down and are focusing on adjusting costs. It's still a very good business to be in."
Next year the ongoing impact of the smoking ban will be a cause of concern and "codification" of the licensing laws is awaited. This streamlining of existing laws will be closely monitored and publicans are hoping few surprises are in the pipeline.