There has been a palpable sense of excitement this year among many London-focused leisure companies over the potential trading fillip from two major, one-off events focused on the capital - the Diamond Jubilee and the Olympic Games. But the jubilee proved something of a washout and now there is growing evidence that the games, while big business in the East End, is having the opposite effect on the rest of the capital.
It seems endless warnings about travel chaos as well as attempts by hoteliers to ramp up prices in anticipation of a swell in demand have put tourists off and caused many Londoners to ship out. Thomas Cook has reported losses on Olympic Games packages, trade bodies are warning of plummeting visitor numbers at key attractions and Experian says footfall in central London was down by nearly 12 per cent on Saturday, the day after the opening ceremony.
Should the anticipated Olympic boost turn out to be a flop, what does it mean for leisure stocks with a strong presence in London, many of which are among our favourite sector picks? Pub groups Young's, Greene King and Fuller, Smith and Turner could be hit, with Young's and Fuller also boasting some exposure to the highly cyclical hotel market. Hotel, coffee chain and restaurants group Whitbread could also feel some effect, although London does not account for too great a proportion of its overall business.
Other leisure companies face more nuanced prospects. Indeed, Restaurant Group could benefit from its positioning around travel hubs, yet the expected fall-off in cinema going could harm trade at its restaurants located in leisure parks. Cineworld is managing film schedules to try to mitigate against the Olympic Games effect. Meanwhile, Domino's Pizza could benefit from couch-bound fans celebrating sporting glory with Olympian feats of pizza eating.
Much fuss has been made about the impact of the games on trading, but it needs to be put into perspective. "For all but the shortest-term investors the impact of the Olympic Games on individual stocks will probably be muted… the majority of any stock's value is contained in earnings streams way out into the future," says Mark Martin, manager of the Neptune UK Mid Cap fund. "I think it's the long-term impact that is potentially significant; the impact on the branding of Great Britain."
