2021/NO.02 - The nation is now entering a critical phase in dealing with the ongoing pandemic, namely the roll out of the vaccination programme and the continuing lockdown and eventual easing of restrictions. Vaccination has been misinterpreted by the POBs as being a definitive be all and end all cure to all of the problems. A specific cut off date. This is the logic they robustly promote to support the offering of a short rent free period in their rent valuation process underpinning MRO. We know this is totally WRONG THINKING. This Newsletter is to explain why we firmly hold that view. But first some relevant cross referencing….
“The virus isn’t clever. Mutations happen by chance. But if a significant proportion of the population is vaccinated against the more common strains, then it allows more resistant strains to spread. Think of it as an evolutionary pressure favouring the new kid on the block. It may never happen but I wouldn’t bet against it and the message is clear. Vaccination is not the end of the line of this pandemic, but rather the beginning of the end and we should have to expect to live with this virus in one form or another, as we do with flu, but for some time if not for ever.” [Dr Mark Porter, Times 2, 19/01/21 ]
“Government too needs to step up and be more long-term in its thinking to provide support and other measures that will allow businesses like ours to start creating jobs again. We need our pubs to be profitable and many can’t be when forced to operate under the restrictions imposed” [Nick Mackenzie. CEO. Greene King. BII News Winter- 2021]
“The pandemic isn’t over until it is over everywhere. This is a problem given the global vaccination schedule it looks likely that that day will be a long time coming…..Half the infections in the world have probably happened since November. Each of those is an opportunity for another mutation that will cause the pandemic to swerve once more. This is why our borders are closing and why we should start to think now about what it would take to fully open them” [Tom Whipple “Analysis” Times 20/01/21 ]
Which takes us to the pre third lockdown/top tiers of the continuation of “accepted restrictions”. The basic truism is that pubs in general cannot be profitable under the current restrictions The pub going world has been successfully brain washed into taking exceptional care to successfully halt the spread of the pandemic. Operators have minimised cross infection by installing fixed screens, enforcing social distancing, bubbles of family groups, being in the fresh air wherever possible. Then there is the continuing acceptance of the prohibition of drinking at the bar, being seated to have a pint, face mask health and safety regulations etc etc. The new and now accepted normal has killed the old style conviviality of the British Boozer. Pretending that somehow we will return to 2019 trade levels and sociability just is not on the horizon. Yet all rent valuations of necessity have to start with a known datum point and that is the use 2019 or very early Y/E 2020 accounts. There is nothing else on which to rely.
There is the very strong likelihood that we will all need a booster ‘jab’ just like the annual flu ‘jab’. However it seems that Covid-19 is far more virulent than flu. Flu never required face masks and all the current restrictions. The problem being when if indeed ever will the pub health and safety restrictions be lifted? No sane government will relax everything in the foreseeable future. Indeed it is highly probable that the hospitality industry will be the very last in the queue. Can Government be seen to be that irresponsible to not have a continuing firm hand on the likelihood of spreading mutant strains of Covid-19? Pubs will have to operate under restrictions imposed long after the full vaccination programme has been fulfilled. From the current perspective, look long into 2022 and beyond.
We are on the cusp of entering a totally different era in the entire hospitality industry. Rent aspirations must take this into account in the long term not for a quick rent free period of maximum six months. Your Pubco telling you that it will all blow away and return to normal is like telling the tide not to come in. If their take on the problem is linked to a different view of the science available, I am sure they will make out their case. We think we will have a long wait.