The cost of kiss-and-fly

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1:23Elsewhere, we'll hear about some new research into airport drop-off charges and why they've increased by a third in just a year. And... In front of their own supporters, Liverpool are back on that perch. It's a record-equalling 20th top-flight title. Liverpool, a football club winning the Premier League title two seasons ago. Well, there's rumours of a potential new investor in the club. Jeff Bezos, his billions, could be used to help the club regain the top prizes at home. Wake up to money from BBC Radio 5 Live. Good morning, welcome to Wake Up To Money. It's Thursday the 23rd of July. It is 5.04.

2:04Still, we're on the first week of a new government and with me this morning are Ian Hoskins, owner of MAP Hub Group, which operates five hospitality venues in Liverpool. Good morning, Ian. Good morning, Leanna. Also got Rachel Winter, partner and investment manager at Killick & Co. Good morning, Rachel. Good morning, Leanna. So, we've got a lot to talk about. We're going to obviously talk about hospitality, Ian. your big topic. We're also going to be talking about airport parking charges. That gets a lot of people going. So if you want to get in touch on that, 85058 or WhatsApp, 08085 909693. We're also going to be talking about where is this money going to come from?

2:43Do you have any thoughts on that? Get in touch with us also about our potential big investor in Liverpool. Ian, I believe you're a Liverpool fan. You might have a few opinions on that. Yes. Well, I mean, any new investor over the years, the issue always is ticket prices for fans and the never ending thirst for corporate boxes and things like that. So I think there's definitely trepidation with any new investor coming into the club. But I do understand it's a minority share that he's looking at rather than majority. So fingers crossed we just get the cash, but none of the influence. But you never know.

3:25I mean, maybe your Amazon Prime membership might get you a discount or like special seats. On your season ticket, right? Yeah, that would be funny. Amazon for your seats. Now, Ian, let's just get initial reaction from this week. What are your thoughts? Have you any announcements that has impacted you recently? Or, you know, you're saying, oh, OK, I'm liking the way things are going. and liking these announcements? Well, the mood music does seem good. You know, Cast Your Mind back a few years ago, Andy Burnham during the COVID years was one of the loud voices. We felt on behalf of the industry that was calling for more support at the time, for more clarity of the way forward and things like that during those long kind of COVID years.

4:17I do believe that Andy gets what hospitality is about and how important it is for particularly northern cities like Manchester and Liverpool. And everything that we've heard so far does sound positive. But I do sort of, you know, preface that with a slight bit of caution. We felt that also about the incoming Labour government, obviously, after so many years of conservatives. and I think a lot of people in the industry felt really disappointed over the last couple of years. Not only has there been a real lack of support, a lot of the measures that were introduced over the last 18 months to two years have actively worked against independent businesses, particularly in the hospitality sector.

4:58We're going to talk about hospitality in just a second, but Rachel, I just want to get your thoughts on how have the markets reacted, first of all, this week? and also are you quite interested in how is this all going to be costed? Where is this money going to come from? Very well. I think the market's actually been quite relaxed so far. So we had been a bit concerned because last year Andy Burnham made that comment saying that we need to stop being in a hock to bond markets. And that led to some concern that he would just borrow huge amounts of money if he were ever to become the prime minister.

5:30But actually, having become the prime minister, he seems to be being fairly cautious. He keeps saying that he will give people the help they need, but will continue to be fiscally prudent. So that has been quite reassuring to markets. And we haven't seen a big sell-off in UK government bonds. And we haven't seen a big sell-off in the pound as yet. So at the moment, we're feeling relatively comfortable. So what's been happening essentially in the past couple of days is that we've had these announcements at 6am. So on Tuesday, the government announced the removal of VAD on household electricity bills in England, Scotland and Wales.

6:03and then yesterday we heard that most bus fares in England would be capped at£2. But there are whispers, you know, we're just hearing on the grapevine. Reports are suggesting that Prime Minister Andy Burnham is preparing to cut a business rates for hospitality industry and that would follow an emergency package announced earlier this year that limited the rise in bills faced by businesses after the latest re-evaluation. It also gave eligible pubs and live music venues a further 15 % discount. And last month, Mr Burnham said he wanted to cut business rates for pubs, clubs, music venues during his maker field by election campaign.

6:40So the hospitality industry has made lots of calls to government in recent months for greater support amid those rising costs of unemployment costs, food, inflation, business rates, bills, etc, etc. Ian, how much do your business rates cost you at the moment a year? so we have uh five venues um i have to say they're not huge super sites you know we're an independent business so we've always gone after cheap rents you know definitely business rates when you're looking at the overall cost package does factor into it you can get somewhere with really cheap rent but the business rates for some reason are completely horrendous often there is no real um logic sometimes to how business rates seem to follow you know how strong your footfall is how good your turnover is.

7:26So I've always been, you know, very, very prudent when we've gone into new locations to make sure that the business rates as they were then were, you know, were as cheap as possible. And but for us, we've actually, during the last revaluation from last year, I think it was three out of our five had doubled, the business rates had doubled within that one year on that revaluation. And then the other two were akin to, I think it was 55 and 70 % increases. I mean, that's absolutely huge, particularly as the support that we had during COVID was being sort of chipped away. So that was a huge, huge increase with everything else that we also got last year, which was obviously the employer's national insurance increase and minimum wage were two other hits that we had to take to the business as well.

8:18Right. So did any of your venues get that previous relief that I mentioned? Well, I don't know if you remember when, you know, everyone got very, very excited thinking that kind of, OK, well, we've got this kind of big revaluation. But, you know, actually, there's going to be some support that will probably mitigate that. Now, the support was 15 percent. And I think you used the phrase selective or and being by and large a pub group, We would assume that most of our, and actually, you know, three out of our five sites of live music at least four times a week, that we would be a slam dunk to have that 15%, which again had been a relative drop in the ocean compared to what the increases were.

9:03Weirdly, only one out of five qualified for that 15%, yeah. Oh, so what would you like to see if a relief was renounced today? well i think and i've said this time and time again i think we need to recognize how important pubs hospitality businesses are to city centers town centers and the high street they encourage footfall um they encourage other businesses to open um there's a lot of research um you know particularly in rural areas about um you know loneliness and mental health and how great these you know hospitality venues are for that so and you know this is the thing i think andy burnham does get that.

9:40So I'd like him to be bold. I know we were talking before about being cautious, but I think for this, you know, a lot of hospitality business are on life support at the moment. And I think unless dramatic intervention happens, there could be a real problem in the next couple of years with the amount of closures and the amount of unemployment, particularly for the under 25s, which hospitality businesses are one of the leading employers. But do you think for your venues that whatever is going to be announced, if something's announced, you know, all of your venues would have to qualify, not just one this time for it actually to make a difference to you?

10:19Yeah, I mean, again, it was really, really arbitrary, you know, the fact that this is a pub, that's a pub, what, just because this serves food and this doesn't, it just seems, you know, I totally get that sometimes you've got to take restaurants and hotels and maybe event spaces perhaps out of the equation. But as we all know, the days of just having pubs and nightclubs are completely gone. You've got places that are cafe bars and there's, you know, we all do pretty much the same thing. So I think some of these, you know, the terms do feel pretty arbitrary. So I think it's only fair for that to be across industry, you know, discount incentive, help support, whatever you want to call it.

11:00Otherwise, it does sit quite badly on the people that don't get it. Rachel, Ian made reference to this, but the wider economic picture is it's not just about rates, isn't it? Also, hospitality businesses, they have to deal with rising wages, national insurance, food costs, so much. So much, yeah. I do feel really sorry for this industry. It feels like it's been hit by every possible cost increase imaginable. But then on the other side of the coin, its customers are also struggling. So we have got the cost of living crisis ongoing. And It also feels that people don't have as much to spend in hospitality venues these days.

11:37So you can really see why they're struggling. And if we look at some of the hospitality companies that trade on the stock exchange, you know, Marston's, Weatherspoons, for example, you can see the struggles really clearly reflected in their share prices. So both of those businesses, their share prices are down about 50 % since pre-COVID times. And of course, if we find something out later on, you're going to be having your eye on where is this money coming from? Exactly. Yes. As we spoke about a few moments ago, you know, the market does want Andy Burnham to be fiscally prudent. So, yes, we do want him to help the businesses that need help, but we want to make sure that help is fully funded.

12:15I think for us, I mean, I've always said that the best way that governments can help us is putting more money in people's pockets. I mean, that's really, really fundamental. You know, as Rachel mentioned before, people have to have the discretionary money to be able to go out and spend. And we found in a few of our venues that operate more on a daytime basis where coffees and muffins, croissants in the business district areas, is that that is the discretionary spending that was trimmed back straight away in 2022. when the energy crisis first started to happen, that we noticed people going out less for lunches from work.

12:55People, you know, the morning coffee and croissant was gone. People were bringing it in or making it in the office. So ultimately, the best way that you can help our industry is making sure, you know, interest rates are coming down, people have got more money to spend. And ultimately, there's confidence that people, you know, don't mind going out and spending money because they're not worried about there's going to be a huge shock around the corner. It is tough, isn't it? Because you have a customer in and you see they come in, they see the price of a pint going up and they don't understand the costs behind it.

13:25So like if you with the rises in business rates and the employment costs that you've had to deal with, have you had to pass those costs on? Yeah, absolutely. I mean, you know, during the last four years, every little thing that you could cut, you could retool kind of menu items. and can we switch out this for this? Can we make this portion, you know, what do they call it? Shrinkflation that they have with chocolate bars. But, you know, you're looking at constant ways to not always just go to the easy thing, which is to put the prices up because it is really, really difficult when people are suffering a cost of living crisis and there's less money about to all of a sudden price yourself out of the game.

14:08So you've got to be really, really creative and look at every possible cost and expense that you've got in the business and not always because actually you know really what you want more than anything is repeat business and people to visit you more and what we found with our business particularly in the business district venues that people were protecting the big events maybe the once a month out with people at work but they weren't going out top-sided businesses as much you know on a weekly basis yeah big events and then just kind of yeah just yeah and and you know even um you know we had to pivot with a couple of the venues that we had and went much more into events because actually the day-to-day trade was so poor that people actually would spend in a completely different way when it was you know somebody's hen party or somebody's birthday or an anniversary and stuff so yeah I mean hospitality is nothing but sort of you know agile in terms of being able to sort of shift shape your way around the industry to sort of smell where the money still is but it does get harder and harder with the years that go on.

15:13Yeah, it's interesting. It's all about consumer behaviour, isn't it, Rachel? Does that perk your ears up and what does that tell us about the economy at the moment? Oh, it's really worrying. So we do know that consumers are struggling. As Ian said, there's not enough disposable income out there and that is causing a lot of these businesses to really struggle. Now, let's talk about a bit more of a macro inflationary factor. Rachel, oil prices are up around 2%, roughly$96 a barrel this morning. That's because shipping's now under threat in both the Strait of Hormuz and the Red Sea. So do you think this is really a genuine global supply shock now, or is this kind of still largely a fair premium?

15:54I think it's a bit of both. So just the fact that the price is high, that in itself could cause a bit of a shock. So it's quite surprising actually how quickly the price has come up over the last few weeks. So if we go back to even early July, it was very close to$70 per barrel and it's now come all the way up to 96. So it's almost back at$100 per barrel again. So that is going to cause problems for inflation around the world. You heard Ian there, Rachel saying it's approaching$100 a barrel again. Can't even say that word. You know, how quickly does a rise like that begin to feed through to a business like yours?

16:29Yeah, I mean, I think we try and work with as many independent suppliers as possible. you know, where possible. And you do, obviously, everything generally comes down to transport costs, you know. So for us, again, what I mentioned before about you've got to just keep juggling. So sometimes, you know, stuff may be more expensive. There may be some overall costs that get passed on. We certainly had that April, May of this year. Duty, it was a kind of a double hit with everything that was going on an Iran. And it is just a kind of a game of whack-a-mole, really, where you've just kind of, you know, you've got a great deal for here and something else goes up.

17:12And it is really, really difficult to keep on top of stuff, particularly, you know, our venues in terms of our kitchens are generally fresh food, you know. So you're constantly, constantly looking at a multitude of different costs there, particularly fresh food, butchery and fish are very very I mean you know the price of fish you know sometimes that can double or triple I mean we're not talking about five or ten percents here it's you know it's crazy so yeah I mean you know it is one of them things where literally that is almost a full-time job just keeping on top of supply prices and making sure you try and mitigate those as much as possible because you can be caught out very, very easily and quickly.

17:55And, you know, bottom line is already under pressure. Yeah. And the direct energy bills as well, I'm sure, worries you too. Oh, 100%. Yeah, yeah, yeah. Yeah. We've got three where we're on a variable from a landlord recharge. So we're not even in control of our own bills. And that feels very, very, very worrying because at least when you've negotiated your own bill, you're locked in for a certain amount of time um so it is um energy you know cellar cooling fridges air conditioning all this kind of stuff um very very high for energy so it is a very very worrying time when you know that kind of things are very very rocky so um i mean i think thankfully compared to a couple of years ago certainly we've not really felt those shocks in energy prices come through as much as they did before.

18:46So I'm keeping my fingers crossed that that continues into the next year. Now, I've promised that we're going to talk about airport parking charges. Got a few texts in the airports need to stop using the drop off charge as a cash cow. There is no justification for it. They give these excuses to keep it going. The competitions committee need to look into this as users have no choice but to pay it. That's from John. We also have another one airport drop off and pick up. The charges are scandalous. Manchester Airport fast pickup is£6.60 for 15 minutes. And then the second one, it's£100. Oh, I think they're saying if you don't pay that, essentially, it's£100.

19:27And my dad got done for that twice in one day. So he was absolutely raging. Rachel, have you ever been done by the airport parking charges? Any thoughts on that? Yeah, I think they're so expensive. So I actually went to pick up my husband from Heathrow Airport a couple of weeks ago. So I parked in the drop-off zone. I paid the fee. But you can only wait there for 15 minutes. And he was a bit late coming through security. So I had to move on to some other sort of parking area and pay another ticket charge. So I think in the end it cost me about£25 just to go and pick him up, which is a lot of money.

20:02It is a lot of money. Sometimes I like to call it life tax just to make myself feel better about it. Anyway, let's get into it. 16 of the UK's 20 busiest airports have increased charges for drivers who drop off passengers since last year, with the average cost increasing by a third since last summer. That's according to new analysis by the automotive services company, the ORAC. And they say that over the last year, the average price to drop someone off at an airport kiss and fly zones, as they're known, is now£7, up by£1.70 since this time last year. Clive Ratton is the Chief Executive of the Business Travel Association, the trade body for the UK's business travel management industry.

20:43Clive, good morning. Good morning. So why have we seen such a sharp increase this time and over the past couple of years, do you think? Well, yeah, it hasn't just been the past year that some of the rates have increased about 60 % over the last three or four years. And it's interesting to note airports rationale for the increase in charges. It depends who you speak to and on what day. So, you know, lots of reasons around reducing congestion at airports. So that's the charge to persuade people to use other transport modes for sustainability reasons, kind of similar, making people travel by public transport.

21:21But latterly, it's kind of being used, particularly in Gatwick's case, they cited that it was to offset the business rates that have been forced on airports in recent times to offset that cost. So, yeah, it has been significant and everyone has a story, like listening to your other colleagues in the studio. It's such a contentious issue for the travelling public. Now, we did have a text in saying, you know, airports need to stop using the drop-off charge as a cash cow. Do you think that that's happening? Is that just an easy way for airports to raise revenue? Well, it is a very easy lever for them to pull because if you look at particularly our large airports, Heathrow and Gatwick, which are regulated by the CAA.

22:05Their charges to the airlines, so the passenger service charge, what have you, has gone through quite a complicated negotiated process. So it's fixed. So what can you change quickly? And that's the drop-off fee. And as you realise, and I think we've done similar research to the RAC, that you'll see that UK airports are pretty much on their own charging this. And we have all UK airports from Inverness down to Bournemouth that charge it. And it is seen as a very easy way. If you've got something in the region of, we have 21 million passengers that our members book per year on business travel trips.

22:42If you add a pound to most of those, around 45 % usually get dropped off or take a cab to the airport. That's a lot of money straight away on your bottom line. Oh, absolutely. Would you think that that would actually feed back in decisions from businesses and say, God, it's so expensive, that person to travel. Let's just do a Zoom call instead. Well, yeah, I mean, it gets to the point, isn't it? I think they play on that it's just a pound or it's just seven pounds that it is. But of course, when you're a business and you're doing multiple trips and paying for it, it adds to the cost on top of everything else that we suffer in travel, the very expensive APD that we have here in the UK.

23:17I think people still go when they're doing business, but what it means is it hits into their budget. So it means less trips. It means less opportunity to go and win business, to go and do business overseas. So it does have an impact. And we hear it. We get feedback from our members, customers, that it has an impact on them and makes a decision around how much money they have to spend on expanding their business. Now, we did try to get a reply from all of the airports. They either declined or they didn't respond, including the trade body representing them, Airports UK. But they did send us a statement.

23:48So it says almost all airports offer a free drop-off facility for those customers that wish to use it. They also provide a wide variety of options to suit all passengers' needs, including premium drop-off in front of the terminal building. It also, this statement also goes on to mention the congestion, the traffic, air pollution, et cetera, et cetera, that you mentioned too, and also, of course, rates. Just about the free drop-off option in a long-stay car park with the shuttle bus, is that a reasonable compromise for people who don't want to pay? Well, is it a compromise? No, it isn't. And so only yesterday, actually, I had somebody contact me who's a business traveller, a female business traveller, who said, you know, I just don't want to be dropped off at 5am at a mid-stay car park and get a bus.

24:37I need to be dropped off outside the terminal. So, you know, there are so many reasons it doesn't work. Anywhere else in the world, you can get dropped off outside the door of the terminal and walk in. You know, from a business travel point of view that we represent, people do get up and get early flights and come back in the evening. And that means, you know, kind of 5am arrivals at airports, 10 o 'clock pickups by the family. You can't get public transport. And equally, you don't want to add that extra time and inconvenience of getting a shuttle bus over and picking up your car on a November morning or evening when it's, you know, absolutely tipping it down with rain and freezing cold.

25:10So, you know, in response to that, yes, airports do operate free drop off, but people don't want it, which is why there's so many moans about it. because the charge, I mean, is that people just want to be dropped off at the airport. So, yeah. And again, I just reiterate that everywhere else in the world, you get to kiss and fly for free. And, you know, we call it here is, you know, kiss and cry because you're parting with money every time you do it. And what's important, we also know, and this is really a critical point, that it's not always the traveller that pays. It's the family member or the friend that's going to drop off.

25:40And if you consider taxi and chauffeur drivers, it's really important. Many of them are self-employed. They will be doing multiple drops a day. they will have to fund that fee before they get reimbursed. And it's a real issue for a number of those in that community who have that cash flow problem. So I know that's sort of moving away from the free drop off, but it is just really such an important part of the travel experience is getting dropped outside the terminal building. Now, airports outside the UK have a different business model. Typically, they're publicly owned and in receipt of state subsidies and tax discounts.

26:12And I suppose the UK airport sector is in contrast with that, isn't it? Generally, they're privately owned. They have to pay full commercial rates. So, I mean, I know in Dublin, Dublin airport, which I'm judging from my accent, you might know. That's where I'm from. But yeah, you just, you rock up, you get dropped off and see you later. That's it. And we do the same as well, even picking people up. Yeah. And listen, in conversations with a couple of airport CEOs saying that, you know, we need to charge this because the model is different. My counter argument to that is that clearly they still need to make the charge.