The last few years have seen very mixed fortunes in the industry due not only to the effects of Brexit and Covid but also how these have impacted on individual businesses in a sector with extremely diverse sites and operations. It is certainly not the case that all have suffered an irrecoverable drop in profitability, or that all have exceeded their best expectations or that all have even fully recovered, so has the market been affected and what should be learnt from this?
From a property perspective visitor attractions are most often valued on a profits basis, with consideration to the underlying asset value. The profits method takes into account fluctuations in profit level from year to year and typically looks at a minimum of three years trading and an assessment of the Fair Maintainable Operating Profit that a Reasonably Efficient Operator could achieve. Whilst there have been limited transactions to demonstrate the impact of Covid-19, such evidence as there is and experience within other leisure sectors has suggested that purchasers and lenders have taken a long term holistic view on profitability, discounting to a significant extent the relatively short term fluctuations, with the impact on values being more muted than perhaps may have been expected. Nonetheless the savvy buyer will assess the trends shown by the business, and whilst a blip in profitability may be forgiven, a lack of long term investment in the site and infrastructure, an inability to adapt and attract new audiences and capitalize on current trends will not.
Difficult times typically spark innovation and have shown that seeking profitability at the expense of all else is not a long term recipe for success. Current surveys suggest that front of house staff have become key, even more so than in the past, to a relaxed and reassured visitor experience and that investment in correct staffing levels, within the right positions, and supported by good training is likely to be more than repaid. Many attractions have sought to cut costs over the last few years, but with many of these being fixed such as rent, business rates, insurance, staffing and repairs, often these cannot be significantly minimized. Continued effective investment in the quality of the visitor experience is essential to footfall maintenance and growth, and whilst some immediate savings may be achievable which can be reflected in short term profits improvement, failure to make the investment is likely to be seen in a steady decline in turnover and no amount of further cost cutting will restore the drop in profits then resulting. On the other hand, following new trends does not necessarily have to cost more – the green agenda and sustainability is increasingly important to visitors and targeted limited investment in this area can lead to cost savings both in the short and long term.
The key staycation trend which has led to substantial additional accommodation becoming part of the attraction offerings looks set to stay – this despite the potential of holidays abroad opening up. The recommencement of international holiday travel will also reintroduce holidaymakers from abroad to the upgraded UK hospitality market and one can hope and expect the government to take self-help steps to end the current labour shortage. UK short breaks and destination mini breaks are and can confidently be predicted to remain popular, with the last few years proving that a wide range of accommodation offering can profitably and authentically be added to the specific attraction experience, from a themed hotel to woodland glamping. Typical profit to turnover margins from accommodation offerings are higher than across the board attraction profitability so this can add a profitable boost to help future proof the business and extend its offer into low and shoulder seasons.