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A Return to the Roaring Twenties?

As the full ferocity of COVID rolled across the globe over the past 20 months, the hospitality and leisure sectors were often hit first and hit hardest. Restrictions, whilst now removed in the UK, forced the closure of venues and whole sectors for months on end. Many wondered, when the storm abated, what the world would look like. Would there be demand for people to socialise in large groups? Would city centres become ghost towns? Was this the end for the pub as we know it?

Two schools of thought formed. The first was that people would become permanently scarred by the pandemic limiting their exposure to crowds by shunning hospitality and looking to move out of cities. They looked at the huge increases in working from home and house price rises in the countryside compared to the decreases in London and other cities as indicators of a desire to avoid other people and said that their case was closed. Cities and hospitality were doomed, and it was better to get out now.

The second looked to the past for inspiration.

The Spanish Flu has many echoes in COVID. It spread with alarming speed across the globe, and necessitated large numbers of restrictions on crowds, theatres, restaurants and bars. Public campaigns to wear masks and open windows to limit infection were widespread[1]. Millions still sadly died. But the aftermath didn’t see the end of pubs, restaurants, theatres or the collapse of city centres. It saw the start of the roaring twenties – an era of unprecedented growth in entertainment and urbanization. People, after a period of enforced distance, decided to make the most of their rediscovered freedoms.

Come the lifting of restrictions in the spring, the sector held its breath. Which worldview would be proven correct? The data gave a sharply clear signal. Hospitality and leisure, left to their own devices, were back. A recent Barclays report showed that revenues were on average 26% higher than 2019 figures[2]. According to Barclays economic modelling, sector revenues from April to December 2021 are likely to be £15.4bn higher than 2019. This performance has been echoed by Edition’s leisure portfolio. All of our hospitality businesses are trading above 2019’s revenues, with new venues opening and locations often fully booked weeks in advance.

It hasn’t all been plain sailing for the sector though. The supply chain crisis and shortages of labour have increased costs significantly for operators and made the return to ‘normality’ more nuanced than the headline revenue growth might suggest. Good quality operators have needed to adapt and respond quickly to satisfy increased customer demand, but despite this there is significant positivity for the future from the sector with 94% of businesses were confident of growth in 2021.

The hollowing out of the city centres similarly seems unfounded. More businesses are expecting to increase their city centre locations than reduce them. This pattern is matched by Edition’s investment portfolio, where we are investing heavily in site openings across UK cities, taking advantage of enhanced landlord deals and the return of office workers. The rush to the countryside seems to have been fairly temporary, with home rental costs rising in London, with the average rent now 3.6% higher than in 2020, as people return to the city[3] and the creature comforts that only a major urban area can offer.

We are not out of the viral woods yet, as recent case rises numbers both in the UK and across Europe attest. However, as the developed world moves from pandemic to endemic COVID, we believe that consumers are likely to emulate their grandparents and great-grandparents in participating in activities that make us happy – spending time with each other and indulging our passions and interests together – and that means a boom for leisure.

The philosopher George Santayana, in words pilfered later by Churchill, said that "Those who cannot remember the past are condemned to repeat it". Demand for experiences, leisure and hospitality remains undimmed. Investors who ignore the lessons from the past and decide to avoid the leisure sector are likely to feel they have missed out if history repeats itself and the 2020s see a boom in consumer demand for leisure. We, at Edition, are determined not to make that mistake.


[2] Barclays – Leisure Rediscovered (2021)


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