Publicans raise a glass to economic recovery
Cantillon: Irish pub sector is growing again following a decade-long hangover from the crash
A pint of Guinness being poured in a Dublin pub. After a number of rough years, the Irish pub sector is back in growth. Photograph: Eric Luke
AIB’s report this week on the Irish pub sector provided a number of interesting insights, and showed a sector in recovery after a near decade-long hangover from the economic crash. Who knew there were more pubs in Cork (955) than in Dublin (772)?
It also revealed that the number of pub sales is now back at normal levels, about 4 to 5 per cent of the stock, after a conveyor belt of insolvency-related transactions in recent years.
According to estate agent Tom Morrissey, who handles a lot of pub sales here, unless a rural pub’s turnover is €8,000 to €9,000 a week, it is “going to be very difficult for them to survive”. In Dublin, the figure is €12,000 to €13,000.
In terms of margins, in Dublin, Ebitda (earnings before interest, tax, depreciation and amortisation) as a percentage of turnover needs to be in the range of 15 to 25 per cent, and 10 to 15 per cent for provincial pubs.
The rise in popularity of craft beers is also captured. Craft beer sales rose by 47 per cent last year and now account for 4 per cent of beer sales.
New lending to pubs in the 12 months to the end of September 2017 rose by 65 per cent to €86 million. Banks clearly have more confidence in the sector.
Food is now an important revenue earner for pubs. Food sales last year rose by 3 per cent and pubs account for 37 per cent of the €2.64 billion food service market here.
Risks for the sector include staff retention, the loss of the 9 per cent VAT rate, and rising insurance costs. After years in the horrors, publicans will welcome such everyday problems.