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Morning Briefing for pub, restaurant and food wervice operators

Fri 13th Nov 2020 - Friday Opinion
Subjects: The pernicious power of modelling, putting a date on new normality, Christmas isn’t cancelled, future-proofing the landlord-tenant ecosystem
Authors: Paul Chase, George Davidson, Amber Staynings, Victoria Oates
 

The pernicious power of modelling by Paul Chase

One of the strongest weapons that so-called “public health” has in its armoury is predictive mathematical modelling. It is this weapon that has enabled the modern public health movement to misrepresent policy-based evidence as evidence-based policy. There is, of course, a legitimate role for predictive modelling – in the absence of actual evidence it is sometimes the best we can do. But modelling can never be more than a well-educated guess and, more often than not, it turns out to be a poorly educated, wildly inaccurate guess. Or worse still, a model that has been engineered deliberately to support a pre-determined policy outcome.
 
My first experience of this misuse of statistical modelling was when I examined the claim there are 1.2 million alcohol-related hospital admissions a year. In my naivety, I was astonished to learn this was not a count of the number of admissions to hospital caused by alcohol, but was a number arrived at by a statistical modelling technique that involved adding-up the alcohol-related fractions that might have contributed to any hospital admission, even those where the primary reason for admission was not alcohol-related at all. The actual number of alcohol-related admissions each year is about 330,000 – so the modelling inflated the real figure by 330%.
 
Then there was the complex modelling done by the Sheffield Alcohol Research Group that made bold predictions about the beneficial effects of introducing minimum unit pricing (MUP) for alcohol – benefits that have not be vindicated since the policy was introduced in Scotland. Predictions, however well calculated, are not evidence and yet MUP was and still is referred to as an “evidence-based policy”.
 
For the general public, these examples are obscure but the covid-19 pandemic has introduced the public to the pernicious influence of predictive mathematical modelling on an epic scale. The now notorious prediction by professor Neil Ferguson there would be 500,000 deaths from covid-19 if the UK government didn’t make a dramatic, whole population intervention is what prompted the lockdown at the end of March this year. And yet we now know the infection peaked a few days before lockdown was introduced. 
 
Did our political leaders in government or opposition learn from this? No, they did not. They fell for the same trick a second time when they introduced the current lockdown based on statistical modelling of the infection and death rates we now know was out of date and inaccurate. These models were used by public health chiefs to panic politicians and frighten the population into enacting and accepting policies that can, at best, temporarily suppress transmission, but do huge collateral damage to other aspects of public health – cancer, heart attack and stroke are not conditions we can put on the shelf for a few months. And sadly, as we know, the damage to hospitality and the wider economy has been inestimable.
 
And where has the official opposition been in all of this? Labour’s position is to back the government’s policies but criticise them for poor delivery. But at last there is the sign of some real opposition in parliament. Lockdown rebels led by MPs Mark Harper and Steve Baker have united to form the Covid Recovery Group (CRG). The CRG has three guiding principles – the chief demand is ministers undertake and publish a full cost-benefit analysis of restrictions on a regional basis looking at the economic and health costs of a lockdown. This will enable MPs to vote to remove such restrictions if it cannot be proved they save more lives than they cost. The second demand is for ministers to end the monopoly of advice given from government scientists and to open up the scientific debate to counter-narratives to avoid groupthink. And the third demand is to improve measures for tackling the virus, such as test and trace, by moving it to local public health teams.
 
I welcome this development as a much overdue reassertion of the role of parliament in scrutinising the executive. I also welcome the news about the development of an effective and safe vaccine. I hope the advent of a vaccine will not be used to justify further lockdowns because the cavalry is just over the hill, but will instead provide the government with the face-saver it needs to pivot from ineffective and costly whole-population measures, to prioritising the most vulnerable when it comes to rolling-out a vaccination programme while opening up the economy. The level of transmission and number of deaths from covid-19 in care homes and hospital settings was and still is the elephant in the room. Solve that, and we’re 90% of the way to solving the bigger problem. Then perhaps government can stop using hospitality and alcohol consumption as handy scapegoats.
 
So, what have we learned about predictive modelling in 2020?
 
1. Complex models predicting the course of the pandemic have been disastrously wrong and harmful in their influence on public policy, public health, and damage to the economy.
2. Complex modelling predicting A-level results produced swathes of wailing teenagers and were disastrously wrong and had to be abandoned.
3. Complex modelling that predicted a landslide victory for Biden in the presidential election were wide of the mark and it came down to a handful of swing states.
 
But, after Boris has “saved Christmas” with the current lockdown, I’m sure the next set of doom-laden predictive models used to justify lockdown in January will be just fine!
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health
 

Putting a date on new normality by George Davidson

When will the covid nightmare end so we can return to some degree of normality? Everyone in our industry has been asking this question and I’ve been well aware of the uncertainty in this area. The hospitality industry is in crisis, veering in and out of lockdown and unclear on the direction of covid in the UK in the coming months. I’d heard a Bill Gates podcast interview with The Economist back in August (when the government was helping us Eat Out To Help Out and urging us back to the office) saying we would be in and out of lockdown until autumn 2021. He said that one of the vaccines would work and it would take a while to be distributed but I was shocked by the date. I hope you won’t be offended if I say I trusted Bill Gates and The Economist more than her majesty’s government. 
 
The Bill Gates interview stayed with me and, in October, I began to wonder if I could investigate an actual end date. At The Lantern, we work on answering difficult and fiddly questions but answering this one felt particularly audacious and ambitious. But, as I dug into the information and conducted expert interviews, it became clear that the pharma industry had a very clear view.
 
It became clear that the industry is very confident that at least one of the 217 vaccines in the pipeline would work and probably several of the 11 currently in phase three large-scale trials. Huge volumes have been pre-ordered and are ready waiting to go just in case. It was felt at least one could be approved and vaccination start before Christmas. One person told me they thought we’d be OK for the Oval Test Match but not for Lord’s. For those who aren’t fans of cricket, that means we won’t be OK for June but should be OK for early September.
 
The report, and future updates, is free to anyone in this industry who would like a copy. But I am summarising the key parts below.

1. Pharmaceutical companies by are now both very close and very confident in their vaccines and it is a question now of how they work, not if they work. This was really confirmed on Monday morning but there are more vaccines close behind.
2. There are now 11 vaccines at phase three, which means they are in large-scale trials with thousands of trialists taking them and being monitored. Regulators are set up for the next stage (approval) and government is lined up for rollout.
3. While the government has not been great at some of its initiatives, the NHS is used to large-scale vaccinations from the winter flu vaccine and the MMR vaccine, which means they are well prepared to roll this out. 
4. It will take several months to vaccinate the millions of people to help us reach vaccine herd immunity. It will depend on both the effectiveness of the vaccine and the virulence of the virus. The news that the Pfizer vaccine is 90% effective means we can be hopeful we can reach vaccine herd immunity sooner. 
5. It’s possible some areas that have had high infection rates, such as London, will have very high immunity levels already. When that is coupled with the vaccination programme, they may emerge sooner from lockdown than other parts of the country. We will know from the levels of cases and deaths in each area. But its anticipated that rates in London were so much higher in the spring so should be able to reach immunity sooner.
6. In August or September 2021, the UK should be reaching vaccine herd immunity and normal life should be returning. Foreign travel may be limited because other countries will be further behind. It’s still not clear if the virus will be completely eradicated or simply controlled. Either way, some sort of normal life will very likely be back.
 
On Sunday night and Monday morning (8-9 November), I put the finishing touches to our report and sent it to a few friends and former colleagues to see how it would be received. I included the sentence: “Both the Pfizer and Astra Zeneca vaccines are now very likely to work across the population. It’s clear now it’s not whether they work but the level of efficacy among different groups.”
 
While I was confident in what I’d learned, I didn’t expect Pfizer to make its vaccine announce just a couple of hours later on Monday morning. I was delighted our report had been proven correct. But, also frustrated that no sooner had I produced my report, it was already in need of updating. I know many market researchers and insights teams in our industry will recognise this feeling from the past few months. We’ve all been dealing with fast-moving targets and changing rules.
 
We will continue to monitor and update the report. Based on our research, we expect that both Pfizer and Astra Zeneca will be looking for regulatory approval very soon with the vaccination programme starting before Christmas. The end is in sight. August may be a long way away but actually knowing a date, I hope, gives some reassurance to our industry. The ship may be leaking water and the engine broken but dry land is in view.
 
To receive a copy of the free report and subscribe for future updates, email George@lanterninsights.co.uk or visit https://www.lanterninsights.co.uk
George Davidson is founder of The Lantern, a market research and insights based consultancy specialising in the hospitality sector. He was previously interim head of insights at Greene King and previously held senior insights positions at McDonald’s and Netflix
 

Christmas isn’t cancelled by Amber Staynings

As we all know, expectations for Christmas in hospitality this year have been reduced to a state of almost collective despair and uncertainty. Normally, operators would already be sitting on 70% of pre-booked sales for the month of December, with key dates fully booked and replete with deposits. The flurry of activity would include weekly meetings, and sales teams/reservationists would be working around the clock to respond to enquiries and customer pre-orders. Private rooms would be booked out and the early Christmas parties would already be in full swing, and no one would dream of having any time off as holiday. We should be gearing up for the busiest and (in my opinion) the very best month of the year to be in hospitality.
 
But it is very different this year and the uncertainty of how this trading quarter will end is making planning almost impossible. In spite of good news about vaccines, we still do not know when the lockdown will end, and “second guessing” how consumers will behave when some semblance of normality arrives. Christmas is always an opportunity to claw back reduced sales from earlier in the year due to issues in or out of a venue’s control. So why on earth do I still believe Christmas isn’t cancelled?
 
Call me an eternal optimist but I believe in the Christmas spirit.
 
The Christmas spirit – and desire to celebrate with loved ones – is covid-proof. There is strong evidence to suggest that as soon as our customers start to plan their visits with venues once again, they will seek to do so with enthusiasm and careful planning of their own. I predict a Christmas upturn, and whether that is 3, 8 or 16 December (and in whatever tier we are given), Christmas is not cancelled.
 
However, we will need to continue to think – and act – differently, and we must continue to sell and promote each venue throughout the current lockdown. To succeed, it’s imperative you remain at the forefront of your customers thoughts, more so now than ever with festive adverts on the increase, mince pie sales rocketing, festive films out on Netflix and a general feeling of “cheer” beginning to fill the air. What’s more, a vaccine is imminent and although it will not benefit the general public for a while yet, it is going to protect the vulnerable, and restrictions will start to ease. Our customers are already planning for their release into the world of hospitality they value so profoundly, seeking out Christmas for their souls, for their mental well-being, and (unselfishly) to help both the economy and the much-loved hospitality sector to rejuvenate.
 
Creating business resilience 
This is the time for operators to bolster their marketing and work to extend the festive period through to the end of January (at least). You can encourage business resilience by planning your Christmas now for all scenarios – and all possible tiers – so there are no more unwelcome surprises.
 
Operators can be bold, spread the festive cheer, and skip the discounts. But far more important and effective is the need to focus on re-engaging with your customers in the most personable way you can. Christmas this year is no longer simply a corporate booking occasion because there will be smaller groups of friends and families seeking a safe and enjoyable environment. Many of these will also be “bubbles of two” and lower spenders, but they will visit you more frequently if you get it right. But do not disregard your corporate contacts and local businesses – perhaps they will buy a gift voucher for their staff or a festive party box or meal kit from you? Perhaps they will still go out in smaller groups of up to 30? Perhaps you will build such a genuine and long-lasting relationship with your customers they will pass on your contact details to other department heads and social committees? If you get the basics right, they will be loyal customers in 2021.
 
Our customers want us, so make sure that it’s your venue they choose to visit and celebrate the festivities in. How do you do this? By getting the basics right, and this means ensuring that every contact – especially pre-booked sales – is warm, genuine and helpful. I am always amazed at how many venues still don’t deliver on this basic requirement.
 
Matt Hancock’s latest statement was (and I quote): “We will inject hope into people’s arms”. Well I say our industry injects “fun, life and well-being” into people’s hearts.
 
So please continue to innovate at every turn, remembering the essentials first and foremost: your interaction with customers, which must be responsive and genuinely warm. There are many new ideas being tried, such as business-to-business party boxes and experiences. I believe this new revenue stream will grow throughout 2021. By all means, prioritise your gift vouchers and sell your unique experiences (such as brunch and afternoon tea, and cocktail masterclasses) seeking opportunities to secure pre-bookings. Gift vouchers are especially useful as a way to reward repeat December visitors and encourage loyalty – yet another way of getting bums on seats now and in the future.
Amber Staynings is chief executive and founder of Bums on Seats – https://bumsonseats.org. Email contact@bumsonseats.org or call 0117 369 0100 if you want to grab a virtual coffee with her
 

Future-proofing the landlord-tenant ecosystem by Victoria Oates

We are now in a second lockdown, something very few will have foreseen back in March when Boris Johnson first told the nation to stay at home. The fight against covid-19 continues, and businesses have shut again.
 
The government’s approach appears reactive, so it should come as no surprise the property industry is behaving the same way. While many would prefer a proactive stance, this comes with too high a risk at a time when the rules are ever-changing. Being reactive is creating its own issues though – landlords and tenants are often seeing a great divide in position, which is testing the relationship and, in many cases, leading to outright confrontation and CCJs.
 
Plenty of tenants have been withholding rent, and understandably so, as they have been hit by the first lockdown, 10pm curfew, rule of six, household mixing ban and an, at best, unclear tier system.
 
It is often forgotten though that landlords have bills to pay too. Not receiving rent for two or three quarters is having a marked impact on their ability to function effectively. Job losses and significantly reduced investment are consequences on both sides of the fence, and a second lockdown cancelling a hefty amount of pre-Christmas trade will not make this better for either party.
 
Covid-19 has not instigated these financial issues, however, it has only served to amplify them. In the pre-covid years, private equity was flowing freely into the casual dining sector. Heightened competition for sites fuelled growing rents and, as a result, landlords enjoyed a sustained period of growth. Combined with business rates, increases to minimum wage and rising value of fundamental commodities, the profit margins for tenants were being squeezed very tightly. 
 
That said, we cannot simply blame the landlords. The untenable financial position of many operators is down to the space race, which saw so many take units that, at any other time, would not have been considered suitable or viable because they were simply too big. It is risk versus reward, a bet on the strength of the market that plenty of businesses have already lost, or will inevitably lose in time. Several chains were struggling long before covid, and it is only the government’s financial packages, landlord rent concessions, and operators’ own incredible innovations that have kept their heads just above water through the crisis.
 
Indeed, we have seen many landlords take a considered, long-term approach to rent collection. Payment plans, reduced rents and turnover-only rents are increasingly commonplace, and no doubt will be for a few more years as existing businesses recover, and new businesses ask for support to grow in a struggling marketplace. The fact is many landlords are doing their bit – their sustained period of growth has finally borne fruit. Acceptance of turnover-only rent looks a vital shift in position – small, intimate restaurants cannot function under social distancing, so bigger spaces that would previously have cost a fortune in ground rent are more important, and viable, than ever.
 
While “coronavirus” may end up being word of the year, within the retail and dining world it will probably be an abbreviation, “CVA”. This used to be a last resort for businesses but, in these times, it is a go-to tool for survival.
 
A word of caution though, for businesses too easily considering the “CVA our problems away” route – at some point things will return to (something akin to) normal, and burning a bridge with a landlord could harm the future of the business you are trying to protect. High streets, bars, restaurants and clubs will reopen, and the decade ahead could well be a celebratory “roaring 20s” as people make the most of being free to go out again. Businesses must do their utmost to ensure they are in a position to capture this, and strong relationships with landlords will be key.
 
A better way forward for many, particularly those with an eye to their long-term future, is to restructure. In my experience of working on restructuring deals, something we are doing more and more of, is they can lead to a long-lasting relationship between landlord and tenant, protecting both to everybody’s benefit. 
 
If we are to truly future-proof bricks and mortar business, landlords need to keep up the hard work and operators need to work with, not against, them. “Survive it together” is a working mantra we could all do well to live by.
Victoria Oates is a partner at Shelley Sandzer Professional Services 

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