Today we’re going to be talking about sums. Andy Povey is joined by Clive Morris, the founder of CCM Consulting. Clive has held some very senior roles in a number of attractions across the world. As a qualified accountant, he bridges the gap between finance and operations in an uncommon way. They talk about the recent change to VAT for attractions in the UK and what information attractions should make sure they capture now to support the ongoing campaign for changes to VAT across leisure and hospitality
In this episode of Skip the Queue, Andy Povey is joined by Clive Morris, founder of CCM Consulting, to explore the financial realities facing visitor attractions. They discuss the recent UK VAT changes, why collecting the right operational and financial data matters, and how attractions can strengthen the case for future VAT reform. Clive also shares practical advice on connecting finance with day-to-day operations to support better business decisions.
Show references:
Clive Morris - founder of CCM Consulting
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Credits:
Written by Sami Entwisle
Edited by Steve Folland
Produced by Emily Burrows and Sami Entwisle (Plaster)
Clive Morris: You look at our European partners, the majority of the big players in Europe are running on VAT rates for leisure and hospitality that are half or less than half of what they are in the UK at the moment.
Andy Povey: Today we're going to be talking sums. I'm joined by Clive Morris, the founder of CMM Consulting. Clive has had some very senior roles in a number of attractions across the world. As a qualified accountant, he bridges the gap between finance and operations in an uncommon way.
Clive Morris: Value is no longer about price. Value is more about the total experience.
Andy Povey: We're going to talk about the recent change to VAT for attractions in the UK.
Clive Morris: Businesses that emerge the strongest from this summer won't necessarily be those that reduce their prices by the most. It will be the businesses that make the best decisions based on the opportunity that they've got.
Andy Povey: What information attractions should make sure they capture now to support the ongoing campaign for changes to VAT across leisure and hospitality.
Clive Morris: If the answer is yes, at the end of this, then the industry has a much stronger evidence based case for that future reform.
Andy Povey: Welcome to Skip the Q the podcast by and for people working with visitor attractions, brought to you by Merrick. I'm your host, Andy Povey.
Clive Morris: I'm a chartered accountant by qualification, but I don't think that really describes me in terms of what I do. I've worked in the leisure and hospitality business for the best part of 30 years, 17 years of that with Merlin Entertainments. And prior to that I started my career in Sainsbury's, which I think gave me really good grounding in terms of big commercial business. And my time at Merlin was really what shaped my career to what it is today. Five years at Legoland Windsor and seven years as the finance director at Thorpe park and led accommodation strategies for both of those businesses, actually. And then I had the opportunity to run the Merlin Midway division finance on a global basis, which was a huge undertaking. 90 Attractions across five continents.
Clive Morris: And that really showed me, I think, demonstrated the breadth of skill and awareness that you need to manage a business of that scale. But I think more recently, it was six years ago now that I moved to lead the finance strategy for Dreamland in Margate. And that was important for me because I was not only owning the finance strategy, but I was also owning the strategy for the whole business alongside the CEO. And I think that defined me as the sort of leader and thinker that I am today. And also in Margate I spent three years as the COO as well as the cfo. And that really helped me then in terms of understanding more about the mechanics of these types of businesses, Leisure has been, you know, something that I've been passionate about for a long time.
Clive Morris: And when I left Dreamland, which was through redundancy, when Live Nation bought the business out, I then decided that for me the next step was to set up my own business and to help other leisure businesses where I can bring my expertise and background to do that. And I think that finance as a support function shouldn't only just support the strategy, it should define it as well. And the consulting business I've got now really is the culmination of the last 25 years of what I've done. I work along a portfolio of businesses, some of them in leisure, some of them not in leisure. And I see myself really as kind of like a strategic growth and value creation partner, helping them to build stronger, more scalable, and ultimately more valuable businesses.
Andy Povey: The combination of operations and finance aren't something that you necessarily see in a lot of people where people have a lot of experience in it. Why is that? Why is it so unusual?
Clive Morris: It's an interesting one because, I mean, accountants are. Accountants are accountants. Right. And most of them have a particular motivation and a particular focus, which is around accounting and finance. I think my career has taken me in a direction where I get my most reward and my most value from being in the business, not just supporting the business. And, you know, all my career I've enjoyed nothing more than walking around the park. People will tell you that if they didn't, if I didn't have a litter picker in my hand, there was something wrong because it's the way that we work. Right. And you want to contribute to the business, you want to, you know, help support the guest experience.
Clive Morris: And I think for me, that specialisation of finance, supported by the deep understanding of the operation itself is what's really helped me with my career development and specifically with the consulting business is that businesses recognize that as quite a rare skill set. And when, you know, when I talk about margin, I'm not just talking about margin as an accountant, I'm talking about margin. Understanding the concepts and the mechanics of what drives that and what businesses can do to influence it.
Andy Povey: We're talking today about the recent change to VAT. Explain it to me in words of one syllable or less, as someone who's not a financial wizard.
Clive Morris: Yeah, I mean, the industry has been talking about this for a long time. You know, there's various reasons why the industry has been talking about it. And mainly it's about stimulating growth and it's about competitiveness. And, you know, you look at our European partners, the majority of the big players in Europe are running on VAT rates for leisure and hospitality that are half or less than half of what they are in the UK at the moment. And about creating a competitive landscape, but also trying to stimulate the market. And the government has basically introduced what they're calling the Great British Summer Savings Scheme. And for businesses in leisure and hospitality, they have reduced the rate of VAT from 20% to 5% between 25 June and 1 September. So it's pretty much this critical summer trading period.
Clive Morris: And it's an interesting one because they call it the Great British Summer Saving Scheme, as in, you know, the consumers and the families can save, but not all attractions are seeing it necessarily in that way. But for those that do qualify, children's meals across hospitality and leisure, the VAT rate has been cut from 20% to 5%. And then for attractions and leisure businesses across theme parks, zoos, museums, farm parks, soft play, etc. Qualifying admission tickets for children and families again have been cut from 20% to 5%.
Clive Morris: And on the face of it, as I say, it looks like a straightforward tax reduction, but actually, I think there's a lot more to it than that and we'll talk more about it, I'm sure, but it's basically asking the question to operators as to what do they do as a consequence of this reduction over this. What is their busiest time of the year?
Andy Povey: Yeah, I mean, that's difficult, isn't it? So we're positioning this, or this is being positioned as a significant price reduction for consumers. But there's an awful lot of attractions. You put on an awful lot more over the summer holidays and would naturally remove from off peak pricing to peak pricing. So it's a complicated arena and we're trying to address this with a very simplistic message. Not all attractions, I believe, are passing on the savings directly to visitors. What are you hearing about that?
Clive Morris: Yeah, it is a very mixed message, Andy. Actually, one of my colleagues that you'll know well, in the leisure sector, Ollie Reed at Navigate, their team did a really good survey a few weeks ago asking exactly the question about what are you doing in attractions? And the output from that particular survey is quite interesting. In at the time that it was published, about a third had said they would pass the savings on. About a third said that they were looking to create some additional revenue and profit as a consequence of it. And interestingly, about a third hadn't decided what to do or were concerned about the complexities of actually implementing it. So, you know, there is a very mixed picture at the moment.
Clive Morris: And what it shows for me is that this initiative has created the capacity for a decision, but it doesn't make the decision. And operators still have to go through that process of saying what it is that we want to do. And I think the public debate has become potentially a little bit too simplistic. People naturally assume that if the VAT falls, then their ticket prices should fall. But those attractions don't all start from the same place. Most have had their margins squeezed over the last few years, and they've got a rising cost base. And, you know, some need to stimulate demand and some are looking to rebuild margins. Some would like to invest, but they've had to delay investment because their cash flows and working capital have been hit.
Clive Morris: So it's an interesting one where you have to look at it across all of those different perspectives of the attraction when determining what it is that they may or may not decide to do. And the way I see it is that operators shouldn't be looking at this and saying how much should be reduced prices by. They should more be looking about it as to what's the best strategic use for them for this particular period. Because those for me, are two very different questions. And I think the businesses that emerge the strongest from this summer won't necessarily be those that reduce their prices or reduce their prices by the most. It will be the businesses that make the best decisions based on the opportunity that they've got.
Andy Povey: So if you were back at one of your attractions, what would you do? What would be your advice?
Clive Morris: I think for me, I have to look at it in the context of what my business is doing at that particular time. And I don't think you start with the answer. I think you start with a problem. And before deciding what to do with that VAD saving, I'd probably ask myself one question, is what problem are you actually trying to solve for your particular attraction? You know, if you've got demand issues or you've got low awareness or you've got poor conversion, you may say, well, actually, I want to hold back on this potential and I need to be using that money to invest, because ultimately a lot of attractions at the moment are finding themselves on that borderline of trade or, you know, potentially go under.
Clive Morris: And so it depends on the circumstances within that particular business, and you need to be able to make that decision based on what is right for you. So although it's perceived as being a Summer saving. Certainly from my perspective, I would want to understand particularly what's my number one problem in my attraction and does this VAT saving give me an opportunity to at least contribute towards being able to deal with it? And the guest perspective of that is that yes, they want to be able to see value for money and yes, they want to be able to see a price point that encourages them to visit, but there's a lot more to their visit than just price.
Clive Morris: You want to create brand advocates, you want to create consumers that want to come back to your attraction time and time again. And you know, if you don't invest in your attraction because you haven't got the money to invest in your attraction, no matter what you charge them, the likelihood is they're not going to have a good day out and they're not going to come back. So for me, I would be very carefully looking at that balance between should I be taking this VAT offer my lead price or should I be looking to maybe part invest some of that back into the product? One of the interesting, quite creative solutions I saw was Adventure island in Essex. What they did was I thought was very clever in the fact that they're already celebrating anniversary.
Clive Morris: So they've got great awareness out there and great marketing. But what they did was they actually put their lead price up on the back of the BAT initiative and then they were giving away a free annual pass. So the value comes from a secondary marketing message that says you're going to be paying slightly more for your ticket to get in, but actually you can come back as many times as you like for the rest of the season for free. So when I looked at the financials of that, they do lose slightly in terms of their overall position on revenue, but what they're doing is they're driving great demand on it because the perception of value for the consumer is amazing.
Andy Povey: No, and I love that creative approach. You can't step away from the politics around this. And the attractions industry has been campaigning and number of associations within the attractions industry have been campaigning for a long time about longer term VAT reform. How does that play into this current situation?
Clive Morris: I think the, I mean, as I mentioned, the reform for me comes from a position of competitiveness and viability for a lot of these businesses. We can talk separately about what's going on within the hospitality sector and you know, Tom Kerridge and what he's doing there, but the level playing field I think is the one which is the key point for me and the longer term reform in terms of VAT is one that is intended really to stimulate the market. There is this current situation where both within leisure and within hospitality margins are squeezed like they've never been squeezed before. There are no easy wins now, like potentially there may have been a decade ago.
Clive Morris: And I think that the attractions have to be able to use this period to be able to demonstrate that it can move the dial. They need to be able to demonstrate that with these types of incentives and initiatives from the government, it can have a positive impact both in the short term in terms of stimulating demand, but also in terms of the perception of value for money in the sector, but also giving businesses the opportunity then to make longer term plans. Because with that stability around VAT and knowing that they have the opportunity to rethink their business plan on a lower rate of VAT, it gives them more confidence, I think, and reduces the risk profile of what it is that they may choose to do in the next three, five, ten years.
Andy Povey: Your comments about stimulating demand, I think what we're doing, what we haven't discussed yet, is the impact of a successful attraction on the surrounding area. So I was up at Kinron a couple of weeks ago and what they're doing in Bishop Auckland is fascinating and really trying to use attractions and tourism to drive fundamental, significant regeneration project. But Dreamland was similar down in Margate, wasn't it?
Clive Morris: Absolutely. And you know, there are certain locations where there is an attraction that is kind of like that centrepiece of the reason to visit. It creates inbound visitation from both a local but also from a national level. And you have to be able to support those types of businesses that give them the opportunity to not just contribute to their own business model, but also significantly to the local economy. You know, Dreamland at its peak was doing 700,000 visitors a year, which was significantly more than any other attraction within a 50 mile radius.
Clive Morris: And so the perception has to be a holistic one that says that we need to support these businesses because that inbound tourism coming into a town to visit an attraction that then go and spend money on food and beverage and on other local attractions is invaluable to both that local economy, but also on a larger sort of macro scale. And the disposable income that families have and people have right now is again challenged. So it has to be about what you're doing to really generate the demand within the sector that those visitors, those families want to choose to spend their money on a leisure or hospitality opportunity. And we are great within our sector of providing amazing days out and Families want that, they want experiences, they want memories.
Clive Morris: And we're quite unique, I think, in terms of being able to provide it. So when I look at it more macro and more holistically, certainly within other areas of the UK, these attractions that are within an area where they are the key driver of inbound domestic tourism, they have to be given the opportunity to be successful.
Andy Povey: Yeah. Did you do any stats on this when you were at Dreamland, on the local economic impact?
Clive Morris: Not specifically within Dreamland, but there are surveys and reports that were done within the sort of planet area of what contribution that makes. And what I would say is that it's significant and what it does is. And Margate's quite a unique proposition in the fact that it is evolving as a destination. There's a lot of people, they call them the DFLs. They're down from London. Yeah. Moving from London down to. They want to be at the seaside, they want a coastal home. And the. The old town in Margate is becoming totally regenerated makers and creatives that are setting up these amazing boutiques and art studios. And what that does is it creates a secondary destination because then people are going, well, Dreamland is there.
Clive Morris: I've also got this wonderful creative sector that I want to see. You've also got in the Turner Contemporary Gallery, which is obviously on the seafront in Margate as well. And over a period of time, one attraction creates a second opportunity, creates a third opportunity. And you know, Margate has a long way to go, but it's now this thriving community of different types of genres and different types of operas that creates a destination for across the board in terms of the people that are coming to the town now, completely.
Andy Povey: I was talking about Universal coming to the UK with Duncan Phillips or Mr. Milton Keynes as I christened him on the podcast. And he had exactly the same approach. A big attraction coming in and being successful will drive more trade for everybody in the area. And I think it's something that you don't hear spoken about outside of the bubble that we exist in the attraction space. I'd love it if Rachel Reeves was to get up and talk about the economic impact that the VAT reduction has made on the wider industry.
Clive Morris: And that's important actually, Andy, that we can't just do this reduction for the summer period and then say, great, that helped. It has to be measured. And this is important that it's a two way process because the attractions have to be able to provide that input into the government and the relevant parts of the government. But Also, the government need to recognize what has happened. There needs to be a full appraisal. Post this so that we can understand what it has done. And if we see, like I expect, that it has stimulated demand in the sector, then there has to be a greater case for longer term reform.
Andy Povey: What else should attractions be doing other than reporting on the success of DIS reduction to persuade or build a case for a longer term VAT reduction or reform?
Clive Morris: As I say, I think that we can use the summer to build the evidence. And it's not just about headlines. It is a fantastic opportunity across the sector. And it's not just commercially, but I think it's strategically as well. I think rather than just debating the VAT in principle, we have to measure what actually happens. And you know, we have our KPIs, our leisure businesses really depend on KPIs to be able to measure what they're doing. And you know, is it driving more visitation? Is it increasing secondary spend? Do they actually get to a position where they can employ more staff because there's greater demand? Because that's another economic benefit is from an employment point of view, busier attractions need more staff. So that's another knock on effect.
Clive Morris: And it then also creates potentially the opportunity for more investment. And what we know in our sector, more than probably most sectors, is that investment in product, investment in attractions, is what really drives year on year growth in the business. And if businesses can't do that investment, then it is going to stifle their ability to be able to invest and grow going forward. And as we discussed a few minutes ago, we shouldn't just be measuring the impact on the attractions themselves, but we would expect to see that there are other local economic benefits within the surrounding area. Any kind of inbound visitation uplift will undoubtedly create extra spend and extra economic benefit for the local area.
Clive Morris: So, you know, if the answer is yes at the end of this, then the industry has a much stronger evidence based case for that future reform that we've talked about.
Andy Povey: So start gathering the data right now with a view to that future conversation.
Clive Morris: Yeah, you know, the strongest argument for me in terms of future reform will always come from the measurable outcomes that it creates. And that's going to be partly perception, but also very much measured by the KPIs and what we see in terms of the uplift of visitation and ultimately spend.
Andy Povey: So you mentioned earlier Tom Kerridge's vats, the problem campaign, which is really focused much more on hospitality, eating, drinking, dining. What are the parallels between that and what we're doing in the attractions world,.
Clive Morris: I think there are a lot of similarities. Probably differentiate it by saying that hospitality is selling capacity by the table, whereas attractions are selling capacity by the day. But ultimately what's important is in both sectors is any unused capacity is gone forever. You know, if that table sits empty or that attraction isn't full, then that capacity is gone. But they do have a lot of similarities in terms of their structure and organisation. So obviously both are very labour-intensive. Both in their own ways have a level of seasonality to them, and both rely on discretionary consumer spending. So, you know, customers are making an informed choice whether to spend or not. But it's also important to note that both have very high fixed costs.
Clive Morris: And this has been one of the key talking points both within hospitality and leisure in the last probably five years, more than ever, is that the cost base for these businesses has reached a point where margins are becoming more and more challenged. And you have to be able to continue to ask the question and bang the drum that says that, you know, if we're making no margin, if we're making no profit, we cannot continue to operate under this type of environment. And probably the difference for attractions over hospitality is that the level of capex needed combined with probably a higher risk profile in attractions is influencing, I think the way that they're looking at it.
Clive Morris: And probably also within leisure, more so within hospitality is the impact of the other external factors like weather plays a big part in terms of these attractions being out side. But I think that in both cases, if there's a reduction of VAT within hospitality, a reduction of VAT within leisure, it will significantly help those businesses to reinvest and, you know, retention of staff, improving the guest experience, creating more employment, then ultimately both sectors benefit. And it's about creating for me, stronger businesses that continue to thrive for the years to come. And if you can create better businesses, you create better experiences, you create stronger employment, and ultimately, you know, that must be good for a healthier local economy.
Andy Povey: You are advising attraction leaders right now. So without giving away all of the CMM consulting magic tools, what would be your advice to someone operating in attraction right now?
Clive Morris: For me, we've talked about the context and it's important to understand the background as to where attraction businesses are. And as I said a few minutes ago, the first thing I'd say is that easy wins are no longer easy. It's not just a case of putting a new compelling proposition. And you know that another 10% of visitors are going to turn up Next year. It's a much more competitive landscape and the economics of it are very different. And I think that the context, if I can talk about that first, is that the environment, I think, demands much more commercial discipline than it probably did, say 10 years ago. The cost inflation that we've seen in the sector has changed the economies of the sector quite significantly.
Clive Morris: And if you look at something like labor costs, for example, the above inflation increases in the national living wage changes to employers, national insurance as squeezed anywhere between sort of 3 and 6 percentage points off an attraction's EBITDA margin. And you know, if you're only running at somewhere between 20 and 30%, which most of them that are trading well are probably within that sector, you could be losing, you know, anywhere between 20 and 25% of your EBITDA margin just through changes in the way that you have to pay your staff. And it's not just on employment. We've seen it across utilities. Insurance premiums are rising. Raw material costs on food and beverage are significantly higher proportionally than what they were, say, 10 years ago, and even higher than other safety and compliance costs.
Clive Morris: You know, we operate in quite a complex market and all of these costs are squeezing, squeezing. So revenue growth no longer really guarantees profit growth. The second thing I'd say is that consumers have become much more value conscious. Families are definitely planning differently. And the lead time to booking. There's been quite a bit of research on this, and the attractions that I work with and that I'm speaking to are saying that the lead times to visit are significantly less than what they've ever been. Guests are potentially in a lot of cases. You know, it used to be two weeks out, one week out in a lot of cases. Now it's 48 hours, 24 hours before they're finally committing to what it is that they're going to do and where they're going to visit.
Clive Morris: And they're also looking around a lot more. You know, it's a very competitive marketplace, as we know. And it's so easy now with technology, you know, artificial intelligence and search engines and everything else to be able to search and find options of what you want to do. And it's not just value's not no longer about price. Value is more about the total experience. And finally, I think in terms of the economics is that capital investment has become more and more precious for attractions. And you can't afford to get those decisions wrong. If you're spending a significant proportion of your working capital on a new product or an investment infrastructure. If you get that wrong, it can be the difference between thriving and surviving, really.
Clive Morris: So, you know, there's a lot going on in the background that I think attraction's a habit to think about before deciding what it is they do. And therefore, there has to be a lot more discipline. So if I was still in an attraction and the conversations that I have with the businesses that I work with, I think that I would be saying that value is not just about the price. And they need to be able to have greater discipline around capital allocation, around understanding more about the market in which they operate. They need to better, I think, at looking at that strategic decision making that isn't just focused on the here and now. It's having clarity about their business plan for the next three to five years.
Clive Morris: And, you know, the margin for error is so small that if you haven't got clarity in terms of your story and your journey, it can be so easy that a decision that you make can have a significant detrimental impact in terms of where that business goes. So there's a thing that I talk about with the businesses that I work with is you don't just improve the revenue and the profit that you make. You have to improve the quality of it. And when I talk about the quality of revenue and the quality of profit, I'm talking about the sustainability of it. How confident are you that your revenue streams and your profit margins are sustainable going forwards?
Clive Morris: Because you've got clarity in terms of your cost base, you've got clarity in terms of your consumers, you've got clarity in terms of your vision and your journey. And that gives you quality in your revenue and quality in your profit. And you're not just chasing more visitors. You're understanding exactly the mechanics of your accounts and your P and L and the commercial factors of your business. And that's really important. And a lot of businesses probably underestimate the importance of having quality in terms of the numbers that they produce. Secondly, for businesses, they have to have more flexibility. It's not just about now saying, we open the doors in the morning. This is what we provide to our guests. This is when we close the gates.
Clive Morris: There has to be more flexibility about operating models, about operating calendars, about diversification. Particularly, I'm an advocate of being able to create new, compelling reasons for guests to want to visit your attraction. One of the big areas that has evolved, particularly in the last 10 years, is about attractions. Be able to operate second gates and having a secondary revenue stream that can be a slightly different product to their primary product. But it creates a different demographic and a different reason to visit. But actually, if you get it right, you get the efficiencies and synergies of the second gate business within your existing infrastructure. But it also can drive significant footfall uplift both to the second gate attraction, but also to the existing one.
Clive Morris: And then I would encourage businesses to adopt what I call a margin risk register. This is a concept that I've introduced and I'm seeing some real good benefits from it because we have risk registers in place for things like insurance and health and safety and compliance, but we don't necessarily identify the risks associated with our commercial or our financial performance. And the attractions that I've worked with to put in a margin risk register are getting much more visibility now in terms of what are those things that if we don't get it right, could have a big impact for us.
Clive Morris: And just by looking at it that way and matrixing it out and understanding where the risks are in terms of your revenue and your profitability is proving to be actually quite an interesting proposition for businesses and enables them to look at their commercial performance in a very different way.
Andy Povey: I love that idea, the risk register for your revenue. So talk to me about that in a little bit more detail. Let's pretend we're operating a small theme park.
Clive Morris: Somewhere from a revenue perspective. One thing I took away from my time at Merlin, which I adopt in a lot of my thinking, is the concept of own the visit. The principle of when a guest, a family, is making a decision about what they're going to do with their day out, the objective for the business should be to own that visit from beginning to end and be looking to maximize their revenue and their profit generation from that. Not just looking at it in terms of they're going to arrive at this time and leave at that time.
Clive Morris: And it's looking at the whole guest journey and it's looking at it from pre booking to post visit, and it's looking at it across all of the touch points within your business, from the car park, from the admissions to the food and beverage to the second gate.
Clive Morris: If you've got one of those, and what you're doing is you're matricing all of those different combinations of what phase are you at in terms of that journey versus where is that touch point in terms of the commerciality of that visit, and analyzing each of those touch points to say, what do we do at the moment in terms of pricing, what do we do in terms of the moment in terms of marketing, what are we doing at the moment in terms of driving spend, what is our cost base associated with that particular element of the visit? And then looking at it from a register perspective, a risk perspective, to say, what could go wrong here and what are we doing to mitigate it?
Clive Morris: Because whenever you look at a risk register, you identify what the risk is and then you have your mitigating factors. And so the idea for me, and the way that it works best is to say, what is the potential risk with this particular part of this commercial transaction? And I know it sounds a little bit dry when I talk about it like that, but that's what you have to do, right?
Andy Povey: You're an accountant. We expect it.
Clive Morris: Absolutely. You look at it from that particular element of the commercial transaction and then you say, what is the risk and what are we doing to mitigate it? But also for me, when I'm doing the risk register with the attractions that I work with is not only what are we doing to mitigate it, but what are we doing to drive it? And that's the important point for me. So that visibility to commercial risk and that visibility to profit risk, not many attractions have got it. They might talk about it, but having it, documented it, having it on a register, having it as a quarterly review process that you can say, what's changed? I talked about, you know, being dynamic, and that's. That's a real, I think, one to take away.
Clive Morris: And I've done a couple of webinars for Balpa actually in the last few months, and it's something that I've talked about there, and it's received some really good traction and something that I want to continue to push. When businesses are saying my margins are squeezed, I'm not making the profit. I'm saying, are you really looking at this at the level that you need to be looking at it to be able to fully understand that risk profile and what you can be doing to help mitigate it?
Andy Povey: I love that approach, Clive. I mean, what you're saying is, let's not sit and moan about the environment that we're in. Yeah, I'm paraphrasing now.
Clive Morris: Yeah, yeah.
Andy Povey: So please, I'm putting words in God's words, but let's not look at the things that we can't control. We can't really influence the national minimum wage or employers national insurance contributions, but we can control what we do about it. And the risk register you've described to me is doing exactly that.
Clive Morris: Yeah, yeah. It's quite funny, actually. One of the attractions that I'm working with have now renamed me the Margin man, because that's exactly what they're seeing, is that it's looking at that from the fact of how are we converting that revenue and what are we doing to be able to maintain it. So, you know, margin, margin is something for me that's fundamentally changed in our sector in the last five or 10 years. And something that has to be a focus.
Andy Povey: Bringing it back to the whole start of this conversation. Reduction in VAT is the opportunity to rebuild that margin.
Clive Morris: Yes. And this is why the debate is so, I think, intense in terms of what do attractions do? Because it's not simply a case of VAT is down by 15%, therefore, let's reduce prices. You know, where your margin has been reduced from 25% 10 years ago to, you know, in some cases, 10, 12% now, that the VAT at the busiest time of the year as well, can be a bit of a game changer for some businesses. That says, I have to be able to look at this from a more commercial point of view rather than purely from a value for money point of view. And, you know, you still create value for money. The guest was going to be paying 30 pounds to get into your traction, whether the VAT was going to be 20% or 5%.
Clive Morris: So if you keep that price the same, how do I then create more value for the guest? How can I still make sure that they go away with a great experience of our attraction? And at the same time, I'm able to drive a bit more profitability and margin through the reduced VAT rate, which will definitely benefit a lot of attractions in the longer run.
Andy Povey: Absolutely. The Adventure island example is really important. You need to own the decision and communicate what it is you're doing.
Clive Morris: Yeah. And whatever it is that you do, the message that you convey to your guests has to be one that gives the perception of we're doing the right thing. And that is very different for all attractions. And, you know, the marketeers out there. There's a lot of head scratching going on, both from a technical point of view and implementing the change, but also in terms of the marketing message, because it's great that all of the collateral that the government are providing in terms of marketing is all about the great British summer saving.
Clive Morris: But for those attractions that aren't necessarily adopting it, there has to be almost more creativity in terms of the marketing message that you give the perception of value and you give the perception of value for money, but ultimately that may not be what is happening.
Andy Povey: Are you aware of any association or anyone that's bringing together the data that we talked about earlier in order to present that case back to the government after this summer period.
Clive Morris: Well, the great thing is that on both the hospitality and the leisure side is we've got two organizations that have been great advocates and supporters of the VAT reduction. So obviously UK Hospitality on the hospitality side and Balpa on the leisure side. You've also got Alva and other sectors who have been very much staunch supporters of a reduction. And what I understand is that there will be a gathering of information. You may have seen Bowper met with Rachel Reeves a month ago at Chessington. So the conversation is there. The relationships that probably weren't as connected five years ago as they are now are in place. The big players in the sector, you know, your merlins, etc. Are very much integral in terms of the conversation.
Clive Morris: So absolutely there will be appraisal and there will be a review following this initiative and therefore I think there will be a very joined up approach in terms of the impact of what the summer Savings Scheme has delivered and therefore a very strong argument, I would hope, for longer term reform within both the hospitality and the leisure sector.
Andy Povey: Yeah, it's something to look forward to, isn't it? And it's great that this connection between government and attraction operators going off at the moment, we are likely to have a new Chancellor by the time that this all comes to an end. So we need to be almost top of the pile.
Clive Morris: Absolutely. I mean, you know, this has been something that's been on the agenda for years and as you say, you know, there has been more changes in leadership, more changes in government and therefore it does have the risk that it can lose the continuity. So it's important that wherever we find ourselves, in six months time, a year's time, three years time, that, as you say, this whole thing about leisure and hospitality businesses and the pressure that they're under and the challenges that they face, these sorts of initiatives around VAT have to be at the top of the pile.
Andy Povey: I suppose attraction operators can help that process by communicating with their local MPs, talking to them about the local impact of this. What's that thing.
Clive Morris: It has to be on a local as well as a national level. Absolutely. Because more so than ever, I think we've talked about it earlier in the podcast, Andy, is that the impact that some of these business have on their local economies is significant. I've seen some great examples actually recently of conversations and meetings that have happened between local government and attractions and hospitality businesses. And I think that when you get the direction from the top, and Rachel Reeves is supportive of a strategy to stimulate growth within the sector, you naturally see that filter down. And therefore I think what it's done is it's opened up more engagement at a local level between local government and businesses in the sector. And that's great because that conversation is all very positive.
Clive Morris: It's all very much looking at it from a sort of local economy position. And the more those conversations happen, the more awareness that's out there, the more likelihood that we will see more and more chance that longer term reform can happen.
Andy Povey: So, Clive, I think in the summary we're advising a couple of things for attractions over the summer as well as having a great time and enjoying the sunshine and entertaining thousands and thousands of guests. It really is. You need to know your numbers and you need to understand the margin. I love the label margin, man. I hope to see it on a business card from you soon, Clive. And then engage with your local politicians. You probably are already, but give them a positive story about the VAT change, if there is one, to share with the new Chancellor, the new Prime Minister, when they come back to work in September.
Clive Morris: Yeah, I mean, ultimately, great businesses aren't built by one exceptional decision or one chain legislation. They're built by making hundreds of great decisions over time and they need the support of the government in terms of policy and legislation to support them. But for me, if businesses continue to ask better questions, make better decisions, they will see better outcomes in the long term.
Andy Povey: Perfect. Clive, thank you so much for your time. If listeners want to get a hold of you, they can find you on LinkedIn. Where else are you around and about this summer?
Clive Morris: Yeah, yeah. So Obviously connect on LinkedIn. I've got my cmm-consulting.co.uk website which has a lot of information about the business and what we do and how I can support them. I'm absolutely getting out to attractions over the summer. We have a wonderful family of kids here and they're already looking forward to farm parks and three or four attractions on the to do list this summer. So we'll be out and about and we'll make sure that we talk about where we go and what we experience.
Andy Povey: Look forward to reading all about it. Clive, thank you so much for your time.
Clive Morris: Great. Thanks very much.
Andy Povey: Well, thank you, Clive. A great deal to think about there and I'm almost certainly going to be using the concept of a margin risk register. If you enjoyed today's episode, then please do like and follow us wherever you get your podcasts. It really helps others to find us. Today's episode was edited by Steve Folland, produced by Sammy Entwistle and Emily Burrows from Plaster with Socials and schedules by Wendellin Dinaldo from Merac hq. I've been your host, Andy Povey, and until next time, thank you and goodbye.