Leisure industry

Citation

(2001), "Leisure industry", Property Management, Vol. 19 No. 1. https://doi.org/10.1108/pm.2001.11319aab.029

Leisure industry

Leisure industry

The lifestyle and life-balance pundits would have us believe that employers still pay lip-service to the idea of offering their employees greater flexibility in working hours and leisure time. Whether you agree with this notion or not, the European leisure industry is convinced that you will spend more of your hard earned cash in the pursuit of leisure, according to a new report published in June 2000 by Ernst & Young.

A survey, conducted across 22 European countries, has found that the leisure industry plans to invest over £20 billion over the next three years. When, where and how this investment will be made – and why the industry remains upbeat in spite of errant stock markets, currency fluctuations, interest rate rises, and the growth in indirect taxation – is addressed by the report.

Key findings include:

Outlook

• •

  Overall, 78 per cent of companies remain confident that the industry will continue to grow, with companies operating in Southern Europe showing the greatest optimism.

• •

  However, confidence in the rate of growth is beginning to wane. Average rate of growth forecasts for 2001 is lower than previous years – 55 per cent of respondents estimated their 1999/2000 growth rate at less than 10 per cent whereas 75 per cent of respondents estimated the same low rate of growth for 2000/2001.

Investment

• •

  UK, Germany, Spain and France will get the lion's share of investment.

• •

  UK based companies offering overseas travel and tourism were, not surprisingly, buoyed by the strong pound but conversely the UK's popularity as a destination for foreign tourists is now seriously under threat. The number of foreign tourists visiting the UK has dropped – latest available figures indicate an annual decline of 3 per cent – whereas UK residents visiting overseas destinations increased by 11 per cent over the same period (International Passenger Survey).

• •

  The accommodation sector will focus on southern Europe whereas the food and beverage operators will concentrate on Northern Europe.

• •

  The most common reason for investment, stated by 38 per cent of companies, is the expansion or refurbishment of existing facilities, unlike previous years where under-supply in the market was the main driver, creating a climate of mergers and acquisitions.

Renata Drinkwater, Partner at Ernst & Young, commented:

The intensity of competition and market consolidation, particularly in the UK, is stifling opportunities for investment in new ventures and new facilities. Not surprisingly, UK companies are having to re-invest funds into existing local facilities and seek new opportunities overseas. For example, 41 per cent of UK companies have plans to invest in Germany but only 14 per cent of German companies are looking to invest in the UK.

Interestingly, the strength of sterling and the govemment's indecision about when or if the UK should adopt the euro seems to be hindering inward investment into the UK, especially from leisure sector companies in continental Europe where only 16 per cent intend to make any significant investment in the British market.

Tax and property issues

• •

  A startling proportion of companies – over a third – had no idea of the likely level of their tax burdens in their future overseas investments and operations, notwithstanding the likelihood that corporate tax costs alone may account for more than half of a company's gross profits.

• •

  Consequently, the survey findings indicate that tax incentives may be overlooked, e.g. specific corporate tax deferral schemes in Sweden, tax allowances for designated investment zones in Spain, tax credits for operators in Hungry, etc.

• •

  There is a misconception that tax rates have increased across Europe and the highest are in the Scandinavian countries, in fact the highest rates are in Germany, Belgium and Italy.

• •

  Freehold property is becoming more popular, especially in the UK, because it is considered a more flexible option than leasing, and new reporting regulations are likely to require leased property to be shown as a cost/liability on the company balance sheet.

Drinkwater says that most leisure industry executives are missing a trick by overlooking the tax angle:

It's a shocking state of affairs that so many senior executives, charged with the responsibility of combating the most severe levels of competition this industry has ever known, deny themselves and their companies of the competitive-edge to be had from efficient tax planning. How many of them, I wonder, know they can save between 25 and 50 per cent of their tax liabilities with prompt and fully integrated tax planning.