UK bowling alleys notch up strikes for investors

UK bowling alleys notch up strikes for investors

The past 12 months have been tough ones for many sectors in the leisure economy with casual dining chains and cinemas closing outlets and shedding staff, as they battled inflation and muted consumer spending.

Yet the humble bowling alley has notched up something of a strike with rising share prices and sales, as customers continued to spend on the family-friendly option.

It has been a pleasant surprise. Ten-pin bowling operators rode the wave of demand for in-person leisure activities since the pandemic, but worried their fortunes would change as high inflation began to erode their customers’ discretionary budgets. 

“As we lapped those really strong 2022 figures coming out of the pandemic, the feeling we had was that the cost of living crisis was likely to affect younger families,” said Greg Johnson, leisure equity analyst at Shore Capital. “It was going to be difficult to grow on that.”

But one year down the line, demand for the low-key pastime is defying analysts’ expectations.

Hollywood Bowl Group, which is the country’s biggest bowling operator with 65 bowling venues in the UK and ongoing expansion in Canada, reported revenues of £215.1mn in the 12 months ending September 2023, up 11 per cent on the previous year.

The Hertfordshire-based company built up just over £50mn of net cash on its balance sheet in the period, and is planning to put that towards buying back up to £10mn worth of its shares this financial year. Shares in the London-listed firm have climbed about 30 per cent in the past six months.

A customer picks up a bowling ball at a Hollywood Bowl centre
Ten-pin bowling operators rode the wave of demand for in-person leisure activities since the pandemic © Ian Forsyth/Getty Images

“They have a balance sheet to support both an existing pipeline and even accelerate that expansion should an opportunity arise, which will clearly support earnings,” said Johnson. 

Hollywood Bowl’s competitor Ten Entertainment also posted growing earnings, with like-for-like sales up almost 40 per cent in 2022 compared with pre-pandemic levels, according to its last published annual report.

The company was scooped up for £287mn by a Dallas-based private equity firm Trive Capital in December.

“We’ve enjoyed a huge surge in demand”, said Graham Cook, chief executive of All Star Lanes, who said the chain experienced 20 per cent like-for-like revenue growth in 2023 compared to the previous year. 

He added the company has attracted a wider range of visitors in recent years, becoming a popular option for corporate team-building events after the pandemic: “Companies in particular have seen the importance of social events as a major incentive for people to come re-join the office, and to build important relationships with colleagues”, he said.

There are several reasons for bowling alleys’ resilience. One factor is that the costs of operating a bowling alley has remained relatively stable at a time when a sharp surge in food and energy inflation put pressure on much of the rest of the hospitality sector to raise prices. 

“When a customer rolls a bowling ball, this doesn’t incur any direct costs,” said Hollywood Bowl. The chain charges one player £6.43 for a game at peak time. The average at Ten Entertainment’s bowling brand Tenpin, which has kept all its prices fixed for the past five years, is £4.90.

The fact that most of these companies’ revenues come from profitable bowling lanes and arcade games means they have been able to use those gains to offset rising costs in other parts of the business, including the food and drinks they offer. 

“Our biggest selling product, burger and chips, is still the same price [of £6.29] it was back in 2019,” said Hollywood Bowl chief executive Stephen Burns. “We’ve been able to protect the pricing on those products given the unique nature of our revenue split.”

Bowling operators are also “significantly less labour intensive” than other sectors within the leisure industry, said Anna Barnfather, leisure equity analyst at Liberum Capital. “So they haven’t had that hit from the national living wage [increase].”

“Bowling is certainly a bright spot within the leisure space”, she added.

A Hollywood Bowl centre in Sheffield
Hollywood Bowl is the UK’s biggest operator with 65 venues © Septemberlegs Editorial/Alamy

Steady prices come as a welcome relief to UK customers who have seen their housing and grocery bills swell last year, at the same time as inflation in the hospitality sector has left them with fewer budget pastime options. 

“Because bowling is so affordable, we attract all income groups,” said Ten Entertainment, noting that the company’s “clientele is totally diverse ranging from grandmothers with grandchildren, to young families and everything in between”.

People have also appeared to be more likely to cut back on retail purchases than leisure experiences.

Consumer spending data by Barclays, which monitors almost half of UK credit and debit card transactions, showed that spending on entertainment rose at an annual rate of 7.5 per cent last year compared with 2022, while spending on clothing was down 0.5 per cent.

A separate spending analysis conducted by Lloyds Bank showed that in December — as friends and colleagues got together for end of year celebrations — the amount spent on bowling in the UK rose 106 per cent year-on-year. In contrast spending on bars and pubs rose 14 per cent over the festive season while that on clothing fell 4 per cent.

The bowling industry saw “a much bigger swing from the young adult market who started to come looking for experiences rather than things”, said Burns. “The whole experiential leisure sector has seen a big jump in the post-Covid environment.”

But analysts and industry executives remain cautious given the economic backdrop. Some expect demand for bowling to ease as the post-pandemic zeal for entertainment quells, and young families, who make up a substantial part of their client base, allocate more of their budgets to paying rent and mortgage fees. 

“Last year we had pretty much everything going in our favour”, said Burns, noting that Hollywood Bowl had also benefited from rainy weather during key trading periods of 2023, which tend to boost indoor activities. 

“We had a great year last year, which is why we are not saying that we are going to be smashing it out of the park during the course of 2024-25.”