Hoping for the best but preparing for the worst

Terry Neale talks to Simon Soar, the chief executive officer of the Jersey Hospitality Association, about the underlying diffculties being faced by an industry which, on the face of it, is back in business after the initial impact of Covid-19.

Simon Soar Picture:DAVID FERGUSON. (29145997)
Simon Soar Picture:DAVID FERGUSON. (29145997)

ON a warm and sunny September morning at Grève de Lecq, it is all too easy to be lulled into thinking that everything is right with the world.

The coffee is good, people are already staking out their territory on the beach for a late-summer tanning session, there are swimmers, pleasure craft – and wasps. Businesses are trading but, as my coffee companion Simon Soar points out, the swan analogy has seldom been more apt: it may look calm on the surface but below the water a lot of frenzied paddling is going on just to stay afloat.

As the chief executive officer of the Jersey Hospitality Association, Mr Soar knows better than most about the struggles that many in his sector are currently facing. And complaints that occasionally reach his ears about the cost of a pint or a bottle of wine in a bar or restaurant show that there is a disconnect between customers and those who provide the goods.

‘There is a lack of understanding of the value of the hospitality industry in the Island,’ he said. ‘People ask, “Why am I paying this price for a pint?” The problem is that businesses have been reducing their margins for a significant period now.

‘There are many costs involved in running a hospitality sector business and what is required is an understanding of the bigger picture: why the market exists in the first place. A keg of beer has to be brought into the Island and we can only buy in small volumes here compared to traders in the UK. We have also seen beer poured down the drain during the lockdown.

‘Property is more expensive in Jersey and there is that high cost of bringing products in – but people still expect prices to be the same as over there.’

And it is not just the everyday costs of commercial enterprise that can cause a headache. Government measures can also leave landlords shrugging their shoulders in frustration.

‘They are battling to keep afloat at the moment,’ said Mr Soar. ‘Between 2000 and 2019 inflation rose by 79.1%. In the same period, duty on a pint of premium beer – such as Peroni or Heineken – went up by 298.89%. Duty is now well over 300% on strong beer.

‘We are having to deal with staggering duty increases like that while the actual cost of producing a pint is not going up by anything like as much. Pubs have reduced their margins in order to absorb some of that cost but they are businesses, not charities: they can’t afford to absorb it all. It is also true that levels of duty like that are not good for encouraging holidaymakers; we are perceived as being expensive here.’

To add to the agony, the licensed trade has also had to cope with the measures introduced to combat the Covid-19 outbreak.

‘This year, not only have they seen a period of zero trading, they also now have to deal with providing a seated-service only. Stock has had to be poured away and not everyone has enjoyed a reduction in their rent. The cost of the last six months has yet to be fully appreciated and the damage it has done will last for a very long time.

‘JHA members are telling me that life is very, very difficult at the moment because they simply can’t trade as normal.’

Even before the pandemic wrought its havoc, the pub culture was going through a period of change. The feeling of community in traditional pubs, noted Mr Soar, is not what it once was.

‘I think that 15 to 20 years ago people probably went out a lot more. They would meet up with friends in the pub before heading off for a night out. Now, they have a few drinks at home and then spend very little when they do go out.

‘The demographic is also changing. The average age of our tourists was around 54 but the older people in that market are now less likely to travel because of fears concerning Covid-19. Even older Islanders don’t go out any more, owing to those same fears, and the younger ones are pre-drinking at home.’

In a sense, then, the hospitality sector is in the grip of a pincer movement; squeezed by a change in the eating and drinking habits of those at either end of the market. What doesn’t change, however, is the unrivalled quality of what the Island has to offer.

‘If you look at the quality of what is produced here, it would be difficult to find independent businesses anywhere else supplying goods to such a high standard. I think that this helps to make Jersey attractive. Here, in this little bay of Grève de Lecq alone, there are four incredible little places where you can go to eat and drink. There is a real value associated with that sort of quality.’

‘Independent’ is probably the key word here; the big chains operate in a different way. Some years ago, Wetherspoons cast an eye across the Channel in the hope of spotting a new and lucrative market. It was made clear to the pub group that its presence was not wanted but, in any case, its business model would probably not be an easy fit in the Island.

‘Wetherspoons’ trading is very much based on drink promotions and you can’t do that in Jersey,’ Mr Soar pointed out. ‘The Island’s licensing laws would make it difficult for them.’

Nevertheless, there have been moves recently to try to create a little more freedom and flexibility for pubs and bars by allowing them to launch special offers in the hope of enticing more customers. Mr Soar, however, is adamant that this is not a viable way forward.

‘Nobody wants happy hours and drinks promotions,’ he stressed. ‘It would be devastating for the industry. If one venue decides on a buy one, get one free offer, and another advertises five beers for the price of two, or whatever, how does everyone compete?

‘It becomes a drive to the bottom and encourages irresponsible drinking. We can’t cut margins like that, anyway.

‘Weekdays are very quiet in the drinks trade, so if you start cutting prices on Fridays and Saturdays, where is the profit supposed to come from?’

Clearly, though, help will have to come from somewhere. With drinking habits changing, venues having to adapt to the requirements of Covid-19 trading and an economic downturn seemingly inevitable as the full effects of dealing with the pandemic hit home, it seems that a perfect storm of adverse trading conditions is brewing. What, then, can government do to limit the likely damage?

‘We would certainly like to see the government stop putting up duty,’ said Mr Soar. ‘They need to freeze it for a few years. The coming recession will hit the industry hard.

‘The government is trying to help us get through but I’m afraid that not every business will survive. We are hoping for the best but preparing for the worst. Investment in premises will go because profits will be needed to pay off accumulated debts. Financial reserves will be decimated and there will be a need to build up that safety net again. The risks apply to all sectors of the hospitality sector.

‘The £100 voucher scheme coming in this month will help. We hope that people will choose carefully where they spend their money.’

In the meantime, the work continues to talk up the industry and the Island in general as much as possible, with several agencies pulling together.

‘Visit Jersey is doing a lot to promote the Island,’ said Mr Soar. ‘They are putting out a strong message about how safe it is here. The problem is seeing more countries going onto the red list.

‘People won’t spend money on a holiday if they have to self-isolate afterwards. Anybody who is not living in a green-rated country will not be travelling here. Our borders may be open but the number of places that people can come from is reducing.’

Mr Soar agreed that the Island had seen a ‘massive turnaround’ from tourist business to locals choosing a staycation. Hotels, though, were likely to suffer the most.

‘Every local person would have to stay in a hotel for a month just to equal the number of bed nights sold in a normal year,’ he said. ‘We have to be very realistic at the moment. If a vaccine is found, then travel will become safer again.

‘We have a superb track record; we have controlled the virus numbers and kept the Island safe. We have also created a Visit Safe Charter, an initiative backed by Visit Jersey, the government and the Jersey Hospitality Association. It has been a lot of hard work.

‘It is all about ticking a lot of boxes in order to ensure consumer confidence, public confidence and confidence in the Island. Businesses are able to say that their venues are adhering to the charter.

‘It is all about doing the right thing.’

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