Why UK hospitality could be going local

Article Experience

Redistribution

If the money once spent by commuters in the bars, cafes and restaurants near their workplaces represents latent demand for spending in the hospitality sector, lockdowns have redistributed that spending potential geographically closer to where people live.

Local demand is booming, and the queues outside any half-decent deli, patisserie or coffee shop on village, market town or suburban high streets speak to the hospitality opportunity in these locations.

Withers LLP has compiled a report, The Future of Real Estate: Work, home and social, and the respondents we spoke to – Chris Miller, CEO of restaurant fund White Rabbit, David McDowell, CEO of brewery and bar chain Brewdog and Nectar Efkarpidis, founder of developers Molonglo – expressed confidence in the sector. But they also acknowledged the need for adaptation and innovation if businesses were to succeed after the pandemic.

While the area around the home is likely to become the social hub for many, that is not to say that people will no longer socialise in and around the places they traditionally worked – they will of course, and in some respects the significance of these more infrequent outings might increase. Nevertheless, they are unlikely to commute solely in order to socialise. As people build and expand their social networks closer to home, demand for quality, variety and choice is likely to see brands and new entrants alike opening outlets in areas that once they would never have considered.

In the short term, the prediction is that it will be the smaller and more agile independent operators that will be best placed to adapt to this geographical shift in demand. Many in the trade think that the well-established operators will be preoccupied with their existing portfolios – having to make tough, large-scale decisions amid dwindling revenue and static overheads – and they will be pipped to the post by smaller players that are better able to respond to immediate shifts in demand.

Over time, we can expect to see a mix of both independent and branded outlets serving these new markets; but the key point is that these will be in suburbs, market towns and the fringes of regional cities, serving a demographic of former commuters now embracing work and social life closer to home.

but the key point is that these will be in suburbs, market towns and the fringes of regional cities, serving a demographic of former commuters now embracing work and social life closer to home

The third space

In some respects, the experimentation with full-time home working has created demand for an entirely new offering, the so-called third space. These are semi-social spaces that are neither home nor office, but that might enable people to do a day’s work without commuting, in an environment with scope for social interaction.

Simply put, working at home all the time is likely to prove too much for many, who are either inadequately equipped or who will want to vary their routines. Many hospitality professionals think that such venues – rather than providers of serviced offices or co-working spaces – are better positioned to fulfil this new need. Their competitive advantage is that they already provide cafes, bars, restaurants and hotels where people want to go to, making them a natural choice for midweek workers seeking somewhere quiet and appealing.

Larger providers of serviced offices, such as Regus or the Office Group, already have footholds in the regions, and may well have their sights set on expansion. But to see these businesses as the natural supplier of third spaces for home-workers to frequent could be to misunderstand this new market.

It is perhaps not demand for the accoutrements of the office – the printing, copying, desk space and so on – that has prompted the rising enthusiasm for the third space, but a more basic need for social interaction with others. Why wouldn’t the hospitality sector be the front-runner?

If there is to be a new home-working model, then it might also hold the secret that has eluded so many high streets for so long. One of the key impediments to successful high-street regeneration has been the absence of midweek trade, but this could become a thing of the past if the well-heeled commuter classes can be tempted out of their home offices during working hours to take roost in a co-working cafe, bar or members’ club for a few hours. The success of the third space for the hospitality sector might also funnel increased spending to our high streets more generally.

A diverse offer

The hospitality venues that succeed in this new market will be those that do a number of things well: combining breakfast, lunch, co-working and a cinema club, for example, is one possible model. This is a challenge for a sector where the maxim has for a long time been to specialise.

Flexibility has been encouraged by the recent planning changes in use class designations by compiling the most frequently used high street use classes into a single use class designation, but this alone is unlikely to be sufficient stimulus for sudden wholesale change. Successful place-making will involve careful curation of the whole high-street experience, a role for which there currently seems to be no clear candidate between planners, policy makers, local authorities, investing institutions and many more.

When the dust begins to settle as the national lockdown measures are eased, we will be able to look for early signs of resurgence. As the central business districts begin to fill again, the media will inevitably focus on improved trading for the chains as the harbinger that things are on the up for hospitality as a whole. But some of us will be looking for green shoots in and around new locations, hoping to see something innovative – and possibly revolutionary.

This article was originally published by RICS on 1 March 2021.

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