We recently undertook a close look at the UK Bowling sector and initiated research coverage on Hollywood Bowl and Ten Entertainment. Both are listed on the main London market with £310m and £161m market caps respectively.
The last 5 years has demonstrated the UK Bowling sector as one of the strongest sub-sectors in Leisure and relatively resilient to macro headwinds. Valued at £285m (source: Mintel) it is a niche sector which sits within the £10bn family leisure market.
The UK market for ten-pin bowling has been around since the 1960s. After a period of decline in the 1970s, the number of UK bowling centres gradually increased to reach 320 by 2007 and now stands at 316 (source: Mintel). This equates to 4 for every 1m people vs 13 per 1m in the USA, implying there is scope for additional capacity.
It is estimated that the ten-pin bowling market in 2017 grew by 9.7% vs. 6.7% in 2016 (source: Mintel), marking the fifth consecutive year of growth. Most of this market growth is being driven by the two leading operators, Hollywood Bowl and Ten Entertainment.
Hollywood Bowl’s expansion is more orientated towards opening new sites. It currently has 20 sites in the pipeline with 6 already signed. Hollywood Bowl was formed in August 2010 when AMF Bowling merged with Hollywood Bowl from Mitchells & Butlers. It is now the clear market leader in the ten-pin bowling sector. It operates 59 centres under the Hollywood Bowl, AMF and Bowlplex brands. It has led the way in making bowling more family friendly, investing heavily in both product (such as VIP lanes and virtual reality) and service to reduce costs and drive sales. The bowling centres are located across the UK and are predominately (75%) on retail and leisure parks.
Ten Entertainment’s strategic focus is to be the lead consolidator in a fragmented industry, acquiring existing sites from competitors and then upgrading the sites. Given there are more than 160 independent bowling centres in the UK, most of whom are struggling, there is merit in picking up distressed assets at a low multiple and modernising the facilities to drive growth and shareholder value. Ten Entertainment is the UK’s second largest operator of bowling centres with 44 sites. It has repositioned its business over the last 6 years, de-emphasising the late night/nightclub type of operation and increasing its appeal to families (up from 27% to >40% of visitors).
As the experience of the Leisure sector post Brexit has shown, cost pressures have been a significant headwind offsetting any organic progress. However, against this inflationary cost backdrop, the ten-pin bowling sector fares favourably, with consumers increasingly seeking experiential treats rather than products. Whilst Hollywood Bowl and Ten Entertainment are following slightly different strategies, it is clear that both companies have promising opportunities for growth.
- The UK Bowling sector is valued at £285m (source: Mintel)
- The UK Leisure sector is valued at £60bn, within which the Family leisure segment is worth £10bn
- Estimated that the ten-pin bowling market grew by 9.7% in 2017 (source: Mintel)
- Growth of the ‘experience economy’ is creating new site roll-out potential
- Value for money family entertainment has meant bowling is on par with most other two hour indoor family activities
- An improving customer proposition in bowling through refurbishments, CRM, dynamic pricing and extended product ranges.
Listen to Sahill discussing the bowling sector in his recent sector note here.