After two years of intermittent lockdowns, increasing labour shortages, and consolidation in hospitality, does the pub sector still offer opportunities for investors?

A resounding yes, say industry leaders who participated in the third of a series of webinars on the post-lockdown hospitality sector from Quantaco.

Paul Waterson, CEO of Australia Venue Co., Jason Marlow, MD of Marlow Hotel Group and Anthony Sullivan, founder and CEO of Quantaco tackled this issue in a discussion led by Quantaco’s Chief Commercial Officer Scott Barber.

The latest lockdowns have created opportunities for some, with over $290bn invested in Australia through stimulus packages and the Australian share market hitting a record high last month.

According to Anthony Sullivan, this translates into a “tsunami of cash waiting to be invested”, and hospitality could well be the recipient.

As an asset, however, hospitality has traditionally not been well understood by institutional investors, although that is starting to change. “Both private and corporate investors are now noticing it as they see opportunities to scale,” Sullivan says.

With nine and a half thousand pubs in Australia, only 11 per cent of which are group-owned, and 89 per cent of which are industry owned, the fragmentation of the industry presents a big opportunity, according to Waterson.

“When you talk about consolidation, there’s a huge amount of white space in there for the individual publican. I think the average publican has something like 2.3 pubs.”

This opens up a window of opportunity for new entrants in the next five years, he believes.

AVC leases its venues rather than owning the asset, and its strategy is to seek out longer leases.

“That’s how we’ve been able to build scale to get to that 170 pubs. If we’d done it through a freehold model, the available capital to us would have meant we were inherently a lot smaller,” Waterson says.

“I think you’re going to see the next five years as a really great window of opportunity for new publicans and restaurateurs to come into the space and get into their first pub, and you might even see senior venue managers looking to move in and buy their first pub.”

Waterson says there’s enough stock out there, once you leave Sydney. “There’s very good buying available across different states,” he says. “If you want to enter your first pub, you can buy a very good leasehold in some of the Queensland markets.”

Jason Marlow says leases used to be shorter and therefore more affordable, but there are still opportunities for new entrants to buy.

Marlow encourages anyone entering the market who doesn’t have the capital to buy a freehold to “buy cheap leases with a lesser term, back their skills and go for it”.

Marlow believes carving out a niche and doing it very well makes the most sense for those looking to enter the market.

“Find something and do it well so you can upscale the offer and charge a premium.”

Watch the Quantaco webinar series here.

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