How Covid-19 is prompting city bars to evolve

City centres have been transformed by the coronavirus pandemic as more people work from home. IWSR looks at how the concept of a city bar may evolve post-Covid-19

Source: IWSR

August 2, 2020

After-work drinking is an established cultural norm in many markets around the world, especially in Western Europe, the US and parts of Asia. City bars have long played a central role in facilitating this social routine, and, in addition to after-work drinks, they are frequently the setting for weekday business meetings. Such venues therefore generate a significant portion of their sales from a city-based workforce – a workforce that has greatly diminished in some markets in the wake of Covid-19.

Over the course of the pandemic, working from home has become the new normal for many companies. Enabled by video-conferencing tools and other technologies, staff members have demonstrated that they can successfully work away from the office in a way they might not have previously imagined. As such, business owners are now offering their employees more flexibility with regards to where they can work in the medium to long term, with some even suggesting home working could become a permanent fixture.

The technology industry is pioneering remote-working models. Social media giants Facebook and Twitter were among the first companies to announce that their employees would be able to work from home indefinitely. Ecommerce multinational Shopify also said most of its staff would work remotely permanently. In July 2020, Fujitsu announced that 80,000 of its Japan-based staff would “begin to primarily work on a remote basis”.

In the finance sector, a number of firms have embraced remote working for the longer term, with RBS and Standard Life announcing that their staff will not return to their offices until 2021. Jes Staley, CEO of Barclays, has said that “the notion of putting 7,000 people in the building may be a thing of the past”.

Even firms that are re-opening their offices are doing so with limited capacity. Many are implementing office rotas, which will reduce the number of people who travel into work daily, allowing them to comply with social-distancing guidelines. In addition, businesses that allow home working to continue will be perceived as supportive of work-life balance and more environmentally sustainable – widely seen as the silver linings of the coronavirus cloud. Many will also inevitably be incentivised by the savings that could be made by downsizing their workspace.

But what does this mean for the bars, pubs and restaurants that have long relied on the patronage of professionals who frequently commute into the city for work?

Key consumption occasion

After-work drinks are a key consumption occasion in numerous Western European countries, notably the UK, where pub culture reigns supreme, as well as in other markets such as Germany, Spain and Italy.

“Undoubtedly, increased working from home will lead to a change in the on-trade in Western Europe,” says Humphrey Serjeantson, IWSR’s Research Director for Western Europe. “As lockdown restrictions are gradually lifted, workers will return to offices to some extent, but it is likely to be a gradual transition.”

Similarly, bars and restaurants in major US cities are suffering as a result of office closures and fewer business clientele than normal, according to Brandy Rand, IWSR’s COO for the Americas. “These establishments thrived on business dinners, after-work drinks and corporate catering,” says Rand.

However, Rand adds that urban areas in the US are also home to young professionals who are a “critical part of the foot traffic” for these venues – particularly bars based in city neighbourhoods that have a high proportion of residential buildings. As such, venues located in business hubs are more likely to be affected by a rise in home working.

In Asia, city bars have been impacted to a lesser degree, as a number of countries in the region have managed to contain and control the spread of the virus: Japan and South Korea – both of which have an established culture of after-working drinking, though this is diminishing as people demand a better work-life balance – have avoided full lockdowns.

“Japan has seen fewer people transition to working from home than most developed nations,” observes Tommy Keeling, IWSR’s Asia-Pacific Research Director. “Homes in major cities tend to be small, and much business still requires documents to be personally signed and stamped, so a higher proportion of workers still need to go in for work.”

Bars adapt business models

Bars around the world, whether urban or rural, have altered their business models to stay afloat during the pandemic. Many have introduced new safety and hygiene measures, restricted table numbers and implemented mandatory reservation systems to adhere to social-distancing guidelines.

“A key factor here is the ability to accommodate drinkers outside – as long as the European summer holds, those bars and pubs with outside space will be better placed to survive in the short-term,” says Serjeantson. He also notes that those bars able to sell alcohol for off-premise consumption are “likely to fare better”. In June 2020, to support the hospitality sector, the UK government announced temporary changes to licensing laws in England and Wales, allowing many more premises to sell alcohol for off-premise consumption. This will be particularly beneficial for city bars, which often have limited indoor space.

In other markets, however, the success of the on-trade is dependent on social distancing not becoming mandatory. According to Keeling, it would be difficult for Japan’s traditional izakayas to implement social-distancing measures, since they rely on a “high density of patrons to keep prices affordable”.

Meanwhile, in Spain – where there is an established lunchtime restaurant culture and a developing trend for after-work drinks – many bars are small and so not suited to any kind of social distancing, observes Dan Mettyear, Research Director at IWSR. “These venues are having to adapt by installing outdoor seating, most of which has been the result of a temporary concession by town councils as a way to help boost trade,” he says.

Rise of the neighbourhood and digital bar: a by-product of the pandemic?

Despite the measures that city bars have taken to encourage drinkers to return, more consumers are choosing to drink closer to home, at least in the short-term. This behaviour is particularly prevalent in the US, due to the country’s state-by-state travel restrictions. “In general, consumers currently feel safest in their own neighbourhoods and are less likely to dine or shop far away from where they live,” notes Rand. “As we approach the fall and winter months, experts are warning the worst could be yet to come, so this may contribute further to more localised consumption behaviour.”

Looking at Western Europe, Serjeantson says the decline in consumption in city bars will be “compensated to some degree by local venues nearer where people live, as people still want to go out for a drink after a day at work”. However, he notes that local venues are also “operating under significant restrictions”.

Virtual socialising and online business meetings have dented on-trade sales temporarily – particularly for bars in urban locations – but IWSR analysts believe that online interaction is a forced by-product of the current environment, and is not a replacement for face-to-face meetings.

“My expectation is that drinking in city-centre bars will recover gradually,” says Serjeantson. “There is no doubt that bars will change. Many may not be able to re-open following their Covid-19 closure but, in the medium term, others are likely to take their place, especially if measures are in place to boost the local economy and help it weather a more serious economic downturn.”