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The Leisure
sector has experienced a good year for capital expenditure investment
with the pubs and bars and hotel sectors in particular
investing substantial sums on re-branding and refurbishment programmes
and driving growth in the sector.
Total
estimated capital expenditure in the leisure sector as a whole was
around £5.9 billion in 2006, with the pub sector accounting for around
26% and the hotel sector around 30%. In 2005, contractors’ output from
new leisure sector construction work totalled £2.9 billion, a decline of
almost 6% on the previous year. In the same year, leisure construction
accounted for around 5% of total new work obtained by contractors in the
UK and around 17% of all commercial new work obtained by contractors.
The immediate outlook for leisure
construction remains fair in 2006 with growth of around 5% expected for
the year, but a slight slowdown in output is expected in 2007 and 2008
due to lower levels of consumer spending. Output is expected to remain
at around 4% in 2007 and 5% in 2008 to reach an estimated output level
of around £3.3 billion in 2008.
Those sectors that are expected to
benefit from improved construction
output, within the leisure industry include the gaming and
casino sector, driven by legislation allowing for 17 new casinos
from 2007, mid-market restaurants and pubs, bars and
mixed-use leisure schemes in town and city centres.
Looking further ahead, the 2012 London Olympics are
expected to give UK tourism a massive boost both in the run up to the
Games and also in the years that follow, due to the ‘Legacy’ phase which
will see the development of improved sporting, leisure and community
facilities. Furthermore, a substantial amount of capital expenditure is
expected to be invested in the serviced accommodation and hospitality
sector in order to bring hotels and facilities up to the international
standard expected by incoming tourists.
Leading contractors picking up the
bulk of retail sector work are Balfour Beatty, Kier, ISG,
Morgan Sindall, Pearce Group, Alfred McAlpine, HBG,
Shepherd Construction, Bowmer & Kirkland, Multibuild,
Sir Robert McAlpine and Midas Construction.
Revenue
from the
UK tourism and leisure industry
passed £100 billion for the first time in 2006 and was estimated to be
worth around £102.6 billion, around £20 billion more than in 2005. The
largest sector within the UK leisure industry in terms of revenue is the
betting and gaming industry (including revenues from casinos),
with revenues reaching approximately £35 billion in 2006, followed by
‘out of home’ drinking in pubs, clubs and bars, valued at around £23
billion, of which the pub sector accounted for £16.9 billion.
Despite global tourism being badly affected by
9/11, the 2005 London bombings, foot and mouth disease in 2001, SARS and
the Iraq War of 2003, there have been signs of a recovery in 2005/06.
Tourism is a long-term growth industry that will be worth well over £110
billion in 2010. Looking further ahead, the 2012 London Olympics are
expected to give UK tourism a massive boost both in the run up to the
Games and also in the years that follow, due to ‘Legacy’ phase which
will see the development of improved sporting, leisure and community
facilities.
Recent market growth in leisure
construction output has been driven by a slight recovery in the tourism
sector, especially in London and
the major business and
conference destinations such as Birmingham, Manchester and Leeds and
cultural and leisure destinations such as, Bath, Cardiff and Edinburgh.
Furthermore, there have been increased levels
of capital expenditure on refurbishment programmes in key end-use
sectors e.g. pub, bars and restaurants, betting and gaming, and the
hotel sector.
The fluctuations experienced in the
hotel and travel industry over the past few years have
impacted upon new build construction in the sector, with the
mid-range category most commonly affected due to lower levels of demand
and lower occupancy levels. Many of the major chains have been more
inclined to defer new build projects until the outlook has stabilised.
However, the majority of chains typically have programmes of renewal or
upgrade on average every 5 years or so, which has maintained steady
growth in the hotel refurbishment sector and offset any decline in new
build construction.
Increasing occupancy levels in the
hotel sector, with demand outstripping supply and a lack of
long-term under-investment in building stock is also helping to underpin
construction opportunities in the UK hotel sector.
Although investment in new build
hotel construction continues, it tends to be focused around certain
sub-sectors. The market for boutique or ‘lifestyle’ hotels, for
example in the luxury or deluxe sector, continues to grow,
with lifestyle operators planning to develop around 5,000 rooms in the
UK to 2011. Furthermore, since 2004, the luxury hotel sector has seen
higher room rate growth than any other segment, including budget
hotels. In response to changing travel patterns and consumer trends,
such as the increase in demand for luxury accommodation and facilities
and the rise of the short breaks market, hoteliers are increasing
raising their standards and introducing new brands. With room rates
currently experiencing growth, development in niche markets such as
boutique and luxury hotels continues to be sustained, with these sectors
able to command premium rates and hotel chains announcing new brands.
Capital expenditure levels in the
hotel sector remains
buoyant, with clients expected to spend in excess of £2 billion on new
build schemes programmes over the next 3 years. This is in addition to
the ongoing programme of refurbishment carried out in the sector by most
chains, with around 20% of bed-stock renovated per year. Total capital
expenditure in the hotel sector is currently running at around £1.8
billion, of which the top 10 chains account for around 61% (£1.1
billion).
Among the UK’s 58,000 pubs and bars, high street
provision has reached saturation point in some areas and the sector is
under constant pressure to evolve, driven by competition, consumer
demand and recent legislative change. Consumer spending in the pub, club
and bar sector is worth around £23 billion, of which the pub sector
accounts for around £16.9 billion. Pub and club sector capital
expenditure currently accounts for around £1.5 billion or 26% of total
capital expenditure in the UK leisure sector.
In 2007, a slight increase in capital expenditure of
around 2% from £1,560m in 2006 to £1,591m in 2007 is expected in the pub
sector, underpinned by interior refurbishment programmes of a number of
major chains as they begin to incorporate and upgrade the portfolios of
recent acquisitions, such as Punch Tavern’s recent purchase of
1,800 pubs from the Spirit Group.
The industry has yet to experience any significant impact
due to the new 24 hour licensing regime and the gradual phasing
in of smoking bans, both of which add further challenges for
owners and developers of premises.
The biggest challenge facing the sector going forward is
undoubtedly the smoking ban, with older, inner city pubs
expected to suffer the most. However, many pubs are expected to benefit
from being smoke-free and take advantage of this by way of an increased
food offer. For example, many town centre pubs may now decide to serve
breakfast in the morning, more formal lunches for the business market
and late night food, music and entertainment.
After several years of new build
expansion, private health and fitness club operators have
recently become more focused on refurbishing existing premises rather
than new roll-outs, due to the low availability of suitable premises and
a certain level of maturity within the sector. In 2005, there was a
decrease in the number of private sector clubs, underpinned by a lack of
investment into the market and the decision by many operators to scale
down and focus on improving the performance of existing clubs, with a
number of companies undertaking refurbishment and reconstruction. It is
unlikely that there will be any significant construction activity in the
health and fitness club sector in the short to medium term, with club
openings currently standing at around 60 per year, less than half the
level seen in 2000.
The gaming industry remains relatively buoyant
with technological and regulatory changes driving demand. Developments
in the UK gaming industry continue to be driven by the impact of
legislation and medium-term
growth in the sector is expected to be driven by deregulation of the
industry in the UK, in view of the complete implementation of the
2005 Gambling Act in September 2007, as well as in the overseas
markets.
The overall size of the casino market is expected
to grow significantly after deregulation, with casino and bingo
operators the main beneficiaries, with more opportunity to expand,
introduce unlimited stakes and prizes and openly compete with other
forms of leisure activities.
Construction activity in the
betting and gaming sector should also be buoyant as deregulation
removes restrictions on the development of bingo halls and casinos.
New market entrants to the gaming sector
such as hotels, pubs or large leisure venues will also be attracted by
the growth opportunities provided by the new legislation including
operators where part of their space could be converted to gaming. In
addition to the 17 casinos planned for 2007 under the new Act,
deregulation is also likely to
lead to an increase in new outlets, both new build and conversions, as
major operators attempt to secure gaming licences before the Gambling
Act comes into force.
In the cinema sector,
a 51%
rise in the number of multiplex screens since 1999, compared to a 20%
decrease in the number of traditional and mixed-use screens, and the
prevalence of out of town developments, has led to a general decline in
town centre locations. Capital expenditure in the cinema sector is
relatively small at just £15m per year, much of which is likely to be
either in refurbishment and modification or in the installation of new
digital equipment
in the 250 screens and 150 cinemas across the country.
Developers in the cinema market are
also focussing on plans to utilise under-used space at existing cinemas,
with various initiatives including premium screens, bars, restaurants
and cinema-themed merchandising and retail. Other issues that may impact
on growth include are the roll-out of digital cinema, high definition
DVDs and online rental. |
