What’s the future for leisure investment in Poland?

Before we ask ourselves about the future for leisure, we need to look to other countries which have developed a comprehensive offer, one that remains successful and profitable and hence can be deemed sustainable over the medium to long term.

Leisure works if it targets an audience and delivers interest and excitement that keeps the dwell-time within the venue to its optimum. To do this it’s clear that your target audience must have disposable income, generally driven by a growing middle class. They are prepared to spend   to enjoy themselves and feel good.

At Trebbi we have worked in a number of European countries developing very specific offer for each  country both from an urban perspective (urban entertainment centres) and edge-of-city experiences (theme parks, aqua parks). It is noticeable when I came to Poland that there was no real integrated family offer in a major city like Warsaw. I was engaged to help Adventure World Warsaw deliver one of the most exciting leisure offers in Central Europe, but when I looked into the existing offer, it revolved around shopping or individual offers like ten-pin bowling. If you did not like shopping or what was on at the movies, what did you do?

Let me take you to two examples of what worked and what did not and lessons learnt.

I am going to take you to Madrid, Barcelona and Valencia – here you would think that they had wonderful leisure past times and yes they did but it was based on shopping or eating in individual venues or restaurants. The Heron Corporation saw the opportunity to create a leisure destination within a semi-urban environment. The sites were in conurbations; they had a name – ‘Heron cities’ and they offered high-quality entertainment (cinema/nightclub/music venue/bowling and health and fitness) some specialist (niche) shopping, good-quality individual restaurants from around the world and a significant public realm or square. The idea was to first attract, then keep your customers by introducing them to interesting concepts, changing moods. Over $1m was spent on light shows with magic fountains that in the summer children could enjoy. On initial opening it was slow but word of mouth is a wonderful thing and after a year it became a go-to place for the family and the dwell time increased from initially up to 2 hrs to 3.5 to 4hrs.

Now I’ll take you to Stockholm, where the same developer as part of the roll-out of his leisure concept chose to create a leisure village in Kungens Kurva, 20 minutes from Stockholm, based on the same criteria as Spain. Of course, the agents were saying that the Swedish enjoy the cinema, they enjoy bowling and eating with the family, just having a good time. The ‘Heron City’ centre was opened; it was enclosed and very stylish, and the components were the same. But the pre-lettings of the space was slow – the key anchor AMC Cinema was under contract, but why were the restaurants and other ancillary entertainment spaces not letting? Research was commissioned and the outcome was that, while people like the idea, they had a cinema in Stockholm and a range of restaurants and they did not want to embrace new restaurant brands, and certainly did not want to drive 20 minutes to see a movie they could see in the city. In a country with strict driving rules – people did not end up wanting to stay and eat – the dwell-time was significantly reduced and therefore tenants did not see the visitors staying for long enough to fill their restaurants and venues.

Changes had to be made to meet local habits. Reports now are that it is a premier shopping and leisure destination, the cinema is now a local brand allowing food to be taken in, thus differentiating from the city centre cinemas. The dwell time has moved closer to the 4hrs that was originally planned. Heron did not listen to its customer and tried to impose a solution to which the customer said “No!”

We now look to Poland: the current offer is fragmented, we have bowling, we have shopping malls with cinemas and food courts, water parks, small themed parks – so what do we need now? My answer is to look to why the Heron City concept has been so successful – it offers a place where the family can go and spend time, enjoying different experiences, doing things that fit within a day out without travelling. In my opinion, major cities do not have the integrated leisure offer for the family that delivers a quality experience, high quality service and a great exciting environment. We all know that the Polish people enjoy a party, if they are offered the chance to have fun at a reasonable price, they take it. Economically, a classic middle class is growing, with the level of disposable income is increasing , a criterion which is a prerequisite of increasing any leisure offer within a country.

From an investment perspective, our clients are looking at a blended yield of 7.5%, which does require key anchors with good covenants to be courted; this currently is the biggest issue and may lead our clients to look to longer-term holding as an investment category working the balance sheet and then selling on a multiple of profits earned. The appetite for Poland is strong, but the deal has to be clear and clean. Given the maturing investment market in Poland and its growing middle class, we can see that the leisure market can be re defined.

 

by Christopher Lowe, CEO, Trebbi Polska