One of the chief executives of the Big Four banks said this week at an off-the-record lunch with reporters that the Australian economy was in a “purple patch” showing no signs of cooling off despite rapid rate hikes from the Reserve Bank.
Indeed, the executive believes the RBA may have to try much harder than the market thinks to tame Australia’s animal spirits.
CEOs angry at the contrast between crowded hospitality venues and empty offices will likely recall Morgan Stanley CEO James Gorman’s anecdote at the Australian Financial Review Business Summit in March.
Gorman was returning to his New York apartment from the gym one night when he stopped at his favorite Japanese restaurant for takeout. A Morgan Stanley employee left a large group of people, walked over and put his arm around Gorman, taking a selfie as he waved to the large crowd he was with.
Gorman asked the guy if he liked being back in the office, and the banker said, “I wouldn’t go back to the office, it’s not safe.”
To get a sense of the stark contrast between empty offices and overcrowded hospitality venues, Chanticleer spoke with Steve Donohue, chief executive of Endeavor Group, which has the largest portfolio of pubs in the country.
live music rules
Endeavor owns 344 hotels, including 132 in Queensland, 55 in NSW, 85 in Victoria, 28 in Western Australia, 35 in South Australia, 5 in Tasmania and 4 in the Northern Territory.
Donohue says live music venues on the Endeavor network are going wild as Australians satiate their ingrained love of socializing.
His two examples of the post-COVID-19 return to the “other office” are punk rock band Amyl and the Sniffers, who sold out the 1,200-seat Pier Bandroom at the Pier Hotel in Frankston next month, Victoria, and the rock band from the Northern Territory. King Stingray selling The Croxton Park Hotel in Thornbury, Victoria, in October.
Donohue says music lovers were being very cautious until this month. They refrained from buying tickets until the last minute because they were worried the event might be canceled or they might get sick.
“But when the event happened, the rooms were full,” he says. “It’s starting to change now, so more people are expecting it to happen, whereas recently there was a bit of apprehension – it feels more and more like normal.”
The Endeavor fared well in the harsh conditions. Her trade in the first half of her was affected by nationwide trade restrictions, including lockdowns in NSW and Victoria.
During fiscal year 2022, there were 231 trading days in which all hotels in the group were open, compared to 195 trading days in 2021. Gross profit margin remained stable at 85%.
Cost of doing business margin at 64 percent, down from 66 percent in 2021, benefited from higher sales leverage and strong cost management.
The market was unimpressed with Endeavour’s cost management and outlook, sending the shares down 12 percent to $7.25 on Tuesday. Donohue expects a continued recovery in profitability as more Australians return to socializing in pubs.
In the first seven weeks of this fiscal year, hotel sales increased 75% compared to the first seven weeks of fiscal 2022 and 13.4% compared to 2020.