The leisure industry has been badly hit by the slowing economy, with most companies in the sector suffering from falling share prices, according to reports today.
Most of the sector saw the rate of decline accelerate early in 2008, although share prices had already begun to fall since the fourth quarter of 2007.
The report in The Daily Telegraph highlighted that except for pubs, which saw a drop-off in Christmas trade, leisure companies were initially suffering from investor perception of a consumer downturn rather than the reality of one.
Hotel groups reported little evidence of slowing demand in the first quarter of the year, with many large companies such as InterContinental Hotels Group, which generates about half of its revenue and profits from franchises, remaining largely untroubled.
A tightening in consumer spending during the second quarter, notably in June, however, made it more difficult for companies to judge the situation.
Adrian Fisk, an adviser at Lehman Brothers, said: “Putting out a current trading statement is incredibly difficult because it is hard to get a read on what is happening.
“Around early June, you would be feeling reasonably optimistic. But there has been a big drop-off in the last two weeks of June and July is looking pretty tough.”
Pub groups were shown to be the ones feeling the slowdown the most, with the smoking ban, tax hikes, falling beer sales and high levels of debt all taking their toll.
Tenanted pub companies, such as Enterprise Inns were cited as facing increasing pressures to keep their struggling landlords in business, while managed operators, like Mitchells & Butlers and JD Wetherspoon, were seen as being better placed to control costs and capital expenditure.
The companies set to benefit most from the downturn were reported to be budget hotel groups such as Travelodge and Premier Inn, which could take advantage of cuts in corporate spending and were better placed to manage their earnings by reducing capacity if the travel market softened.
While leisure stocks were described as being undervalued, the report said that the prospect of deals was being held back by a combination of constrained debt markets and a general sense of unease about the sector.
