Businesses seeking to expand despite hospitality headwinds, report reveals

Expansion and M&A activity is set to continue into the new year despite tough economic headwinds for the hospitality industry, according to an industry overview.

A hospitality and leisure report from OakNorth bank revealed hotel executives expect acquisition-driven growth to accelerate in 2025.

Citing figures from a survey conducted by Deloitte among nearly 100 executives and investors in the hospitality industry, OakNorth said over half (59%) of respondents believed the UK hotel market will “increase significantly” over the next five years.

However, it did warn of a "squeezed middle", as the UK’s mid-market hotels continue to underperform compared to their budget or luxury peers.

The report also touched on asylum lodging providing an “unexpected revenue stream” for hotels in less frequented areas over the past six months, though that will likely change in the New Year given Labour’s pre-election pledge to reduce the amount of asylum seekers being housed in hotels.

Meanwhile, the competitive socialising sub-sector has experienced a 38% boost since 2018, with OakNorth stating this will be “a growth area we’ll be keeping an eye on” over the next six months.

Casual dining has also shown slow signs of recovery with a 1.7% increase in the number of outlets over the past year, bringing the total number of restaurants to 5,167, according to figures from CGA and AlixPartners.

Ben Barbanel, head of debt finance at OakNorth, said: “The UK’s hospitality and leisure industry continues to face numerous challenges, from staff shortages to the cost-of-living crisis, but despite these headwinds, we see businesses seeking opportunities to expand and further enhance their portfolios.

“Businesses such as Rocket Leisure continue to build a loyal and engaged customer-base via a unique proposition of live music almost every night, that attracts over 6,000 customer each week.”

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