Australian pubs face a long road back after lockdown

Publican Leisa Wheatland says a large empty pub is a bit like a school with no kids, "it’s pretty sad and lonely without patrons."

Coffee windows, jam jar cocktails, takeaway dinners and "takeovers" by patrons are keeping Australia’s shuttered pubs afloat, but as the industry toasts the lifting of lockdown laws next week, publicans say bouncing back from the brink is not as simple as pouring a pint.

Wheatland, who runs the Bush Inn hotel on a busy Melbourne intersection in Toorak with her son Ryan, describes the abrupt shutdown of their business in March as "devastating."

"In the first couple of weeks I didn't think we would survive. I thought it was all over."

"To keep our mental health OK, we opened a coffee window just to chat to our patrons and keep connecting with them. Revenue-wise it was worth nothing," she says.

For Ray Reilly, owner of Marrickville’s The Henson in Sydney’s trendy inner west, keeping connected with customers was equally important.

"Initially we shut down basically to regroup and find a way out of hole we were digging. We were losing tens of thousands a week if we stayed open."

Reilly, who also owns the Sydney Park Hotel in Newtown and the White Cockatoo in Petersham, closing the venues also came at enormous cost.

"We’re just trying our best to get through it all. It’s costing $8000 a week in utility bills just to keep the pubs shut," he says. "It's pretty much day by day. I’ve spent 25 years working to get to this point. It’s just a horrible feeling. We’ve got to dig deep and get on with it."

The crushing coronavirus blow has not just hit small operators.

Australian Venue Co., a pub group backed by Wall Street private equity giant KKR, estimates it will lose $150 million to $170 million in revenue by the end of the year.

"It’s costing $8000 a week in utility bills just to keep the pubs shut."Sydney publican Ray Reilly

"It’s a big hit," says Paul Waterson, chief executive of the group’s 170 Australian hotels. "What we’re seeing is each pub is losing on average about $40,000 per month while it’s closed. We’re fortunate in that we can absorb that," he says.

"Some individual publicans don’t have that ability. They’re putting it against their home loans. It’s really concerning how that’s going to play out over the next six months."

He expects the next six months to be really tough - especially for the group's CBD-based hotels which face far fewer office workers - despite the lifting of lockdown laws allowing 50 seated food-eating patrons in NSW (up from 10 previously) and 20 in Victoria from Monday.

Publicans are still unsure how the new Victorian rules, which talk about 20 patrons per enclosed space, will operate. "We’re still waiting on advice about what the definition of a closed space is," he says.

Endeavour Group, majority owned by Woolworths along with billionaire hotelier Bruce Mathieson, will re-open its 52 NSW hotels next Monday.

But the COVID-19 outbreak has forced Woolies to postpone a decision it expected to make this year on whether to sell, demerge or float the Endeavour business, until 2021.

Along with Australian Venue Co., it isn’t expecting to have to permanently shut any of the 323 pubs and clubs it owns across the country as a result of the coronavirus outbreak.

"We look forward to welcoming our staff and customers back in venues in other states as and when guidelines change," a spokesman said.

Waterson says his group has "spent a lot of time getting the pubs ready for this [reopening]."

Rules requiring hotels to keep track of the number of patrons and maintain a log of visitors will be "challenging," he says.

Under the new "sit down and eat" rules, however, regulars can’t come in for their three to four pots of beer and just stand at the bar. "The look on their faces is just complete disappointment," he says, when they find out.

But limiting patron numbers is also creating a new fad: pub takeovers.

Whole-of-pub bookings for days with key sporting events are taking off. "We’re already seeing large numbers of bookings coming through for people with 19 mates to book out the pub and watch the footy," Waterson says.

Reopening brings uncertainty, says Reilly, and the fear of having a virus outbreak in one of the pubs.

To give an indication of the impact of the lockdowns on the wider hotel industry, national chief executive of the Australian Hotels Association Stephen Ferguson cites NSW workforce figures. The state's hotel industry has 75,000 staff, he says, of which 70,000 have been stood down.

"The vast majority (of Australian hotels) have been closed down completely. We think that probably between 5 and 7 per cent have been offering take away services, those that have bottle shops have obviously kept those going," he says.

"Since the 23rd of March, the hotel industry has not been in hibernation, it has been walking towards a debt cliff. A typical hotel would be incurring costs of about $35,000 every month."

The hefty ongoing costs have been for things like insurance, electricity, council rates, land tax, rent or interest, and have kept coming while the pub doors have been shut and most proprietors have generated no revenue.

To assist the struggling industry the AHA is calling for an extension of the Federal Government's JobKeeper program, praised by the AHA, to at least December 31, the removal of Fringe Benefits Tax from hospitality and accommodation expenses for three years, and the removal of CPI-linked increases in liquor excise for three years.

Ferguson acknowledges that recent decisions by state governments to allow hotels to start reopening, albeit with strict limits on patron numbers, have allowed hoteliers to look forward and make plans for the future. But he says proprietors still feel like they're operating in a climate of uncertainty.

"We just want to get back to normal. Not new normal, we'd like to get back to normal. We understand that heightened hygiene will obviously be a part of every business that has people walking through the door," he says.

When lockdowns swept across the nation in March and closed pub doors, they sent a ripple through the wider industry that hit the nation's brewing giants immediately.

At the time pubs, clubs and other venues held hundreds of thousands of kegs of beer. This beer doesn't last forever, so brewers undertook the huge and costly exercise of picking them up.

Lion, the nation's second biggest beermaker with about a 35 per cent market share, had about 107,000 kegs to retrieve and empty.

For the Wheatlands the impact of the coronavirus pandemic has been a "business nightmare."

"Hopefully we're waking up from it now. As we're getting closer, I'm excited," Leisa Wheatland says. "We'll come through this but it will take some time."