How the big picture affects Pubs and Clubs


Political and economic uncertainty are the dark clouds which forever hang over the hospitality market in some form. The current environment both overseas and locally, is an ever-present example of how venues can be at the mercy of more wide scale events.

The Trading Economics website (www.tradingeconomics.com) is the leading source of publicly available economic and sentiment data which gives readers a view on a large number of indices. An often quoted number for the wider ‘discretionary spend business’ across retail and hospitality is ‘consumer confidence’ which assigns an aggregated score from a large sample of consumers in Australia. Over 100 indicates a positive outlook, a score under 100 is negative. The November 2019 score is listed as 97, indicating a slighting negative level of ‘consumer confidence’ which translates as a resistance of customers to spend at normal levels.  While the nature of how the number is generated is somewhat imperfect, it does reflect some of the political and economic uncertainty we are now experiencing. As a starting point, this number is an effective way of sampling what consumers are thinking, but what other numbers can be lead indicators of the market environment? Below are some other numbers worth monitoring to possibly explain your customers spending patterns;

 

Petrol Prices – highly visible price fluctuations in what amounts to a daily staple in the western world will often impact discretionary income when prices rise. If consumers need to make immediate sacrifices to fill up the tank, the most obvious ‘victim’ will be a hospitality visit.

Two sides of the interest rate coin – depending on who your target market is will depend on who benefits. Low interest rates benefit families with mortgages as it allows more discretionary income spend, while the flip side of this is self-funded retirees’ earning capacity that diminishes their discretionary spend capacity.

The role of inflation – while inflation is a price regulator, it is also a job and investment stimulator as they are all connected. As prices increase, wages and investment increase and the cycle of economic growth continues. When the cycle stagnates, the traction of economic stimulus stalls and creates economic uncertainty (reference first line of article).

While any business would be well advised to focus on what outcomes it can reasonably expect to effect, it’s always worth keeping tabs on the larger picture and possible underlying reasons for your current business performance.