For many years property has been top of the investment portfolio, however with residential property prices stagnating and in some areas falling, is it time to seek out alternatives? You may consider fine wines, which still produce excellent returns, in some cases upwards of 20%, although these are generally a longer term investment. You might fancy some fine art, but beware this market is extremely volatile and although it has been very buoyant experts warn it may not last. Stocks and shares are still good, even with all the warnings over 'Brexit', the Footsie is currently over 7,300, that is up from the low seen on 24th June last year when we voted to leave!
I therefore turn your attention to the restaurant and hotel market in the UK. Due to the weakened pound there has been an increase in investors from oversees into the market, in particular from Asia. So what do they see that possibly you haven't yet?
Firstly potential the movement in prices in the last 3 years the hotels, restaurant and pub sectors have seen strong increases. Last year alone the average prices for these three groups grew by 6, 14.1 and 4.4 percent respectively. Although the hotels and pub sectors have seen the prices increases slow, the restaurant sector is booming.
However this investment isn't just about the movements in the property price, it's also driven by the consumer. In the UK we are now spending more on eating out, with recent figures from the ONS stating the average household spends more than £45 per week on restaurants and hotels for the first time since 2011. The UK’s dining-out sector is worth over £87bn, yes the level of competition is high, but if you get the offering right and the systems in place the rewards are significant. In the last year private equity firms have seen this and bought into new growing chains such as Loungers and Stonegate.
It is clear that customers are looking for operators that are in tune with the latest trends are fast with fashionable food. The so-called Instagram generation are seeking out the hottest, flash brands that resonate and communicate directly to them. It’s about connections, communication, customer service and experience.
Investments into this sector are not without their risks and certainly not all get it right. Some chains have become casualties, because they failed to get the fundamentals right. Ed’s Easy Diner was one of these and it is predicted that in 2017 maybe two or three others may go as well. Jamie’s Italian has recently announced the closure of a number of units.
One market I haven’t mentioned yet is the wedding market, worth over £10bn a year in the UK.
I personally have worked in the last few years with a few exclusive use venues and seen the excellent returns on investment by these types of venues.
One of my clients invested around £1m in a purchase and refurbishment of a venue that now hosts over 200 weddings a year and 85 plus conferences and meetings bringing in a revenue of around £3m. This highly lucrative market has some major advantages over running the venues as a hotel and only offering them exclusively.
So for me yes the investment into this sector is a good one, you need to have the right opportunity, clear vision and operational structure.
If you are considering investing in this sector and require help in seeking the right opportunities, contact me for a free consultation now.
JON BUTLER - OutSauced Consultancy