Licensed Trade: Three Galway pubs are expected to make good prices when they go under the hammer this week - and pub values generally remain strong, especially where publicans provide attractive outside areas. Gretchen Friemann reports

Last week's landlord's revolt against the smoking ban painted a bleak picture of an industry pinned against the wall by a sudden and dramatic fall-off in turnover. Pub owners complained the loss of trade from the ban has triggered widespread layoffs and argued unless concessions are made for sealed-off smoking areas, many businesses will go to the wall.

But property experts disagree. They claim it's too early to assess the impact of the smoking ban on pub values and say there is little evidence so far of a reversal of the strong demand that has recently generated record prices for licenced properties.

Astronomic sums, like the €8.1 million paid for The Playwright in Blackrock or the €8 million paid for the Yacht in Clontarf have succeeded in dispelling fears amongst property agents that industry values are softening against shifting consumer patterns, falling volumes and rapidly increasing overheads, such as insurance.

Experts point out that the licensed sector is constantly adapting to new trading patterns and argue the ban is unlikely to have a sustained impact on those premises that can offer outside areas for smokers. According to Mr John Ryan of CB Richard Ellis Gunne, landlocked pubs in rural or low-footfall areas are likely to bear the brunt of any negative hit on licence values, but he claimed the first six months of this year have proved "extremely buoyant" and said "everyone will be closely watching sales over the next six months to gauge whether the ban is having any material affect on prices."

Mr Ryan recently handled the disposal of The Baroque in Clondalkin in west Dublin which changed hands for close to €5 million and was the last of The Moran Hotel Group's three Dublin pubs to be sold. It's understood the company raised at least €17.5 million from the properties, all of which were sold this year.

For those establishments that are hit by a slump in turnover, Mr Tom Morrissey of Morrissey's property consultants, an agency that specialises in the licensed market believes the negative slide could be as high as 25 per cent, which tallies with statements from the Licenced Vintner's Association and the Vintner's Federation of Ireland of a 15 to 25 per cent overall drop in turnover throughout the industry.

However, Galway auctioneer, Mr Colm O'Donnellan, of O'Donnellan & Joyce, is unfazed at the recent outcries of distress from the publicans and maintains he will achieve or exceed the asking prices on three pubs about to come under the hammer.

This Friday, two of the properties, The Stagedoor in Woodquay, which has a guide of €4 million, and the Merlin Bar on the outskirts of Galway city, with a guide of €2 million to €2.5 million, will go up for auction. The auctioneer is again guiding up to €2.5 million on Walshe's pub in Bohermore.

Despite the robust sale prices, Mr Morrissey warns industry is facing its toughest test yet, with the smoking ban compounding the impact of higher overheads and crippling tax laws.

He said although record sale prices point to a buoyant market "the reality is that for most pubs, the sales are now only two to three times the value of turnover whereas in the late 1990s it would have been at least four or five times the value of turnover"."

He also pointed out that the day-time trade for many establishments had dried up and would inevitably lead to the closure of many pubs in "less attractive locations".

According to Mr Morrissey, even the super pubs are suffering from a severe profit-margin squeeze. "If you look at the window these guys have for trading now, it's extremely low. Really they have a maximum of two or three full days of trading with turnover largely generated in the evenings on Thursday, Friday and Saturday. That's a long way from what it used to be in the late 1990s and 2000," he said. But Mr Morrissey stressed the smoking ban will not have a uniform impact on the industry. He said status pubs, such as Kehoes off Grafton Street, will continue to command high prices and said establishments with attractive outside smoking areas are likely to benefit from the distress experienced elsewhere in the sector.