{"id":669463,"date":"2026-01-02T18:00:17","date_gmt":"2026-01-02T18:00:17","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/669463\/"},"modified":"2026-01-02T18:00:17","modified_gmt":"2026-01-02T18:00:17","slug":"how-to-profit-from-the-uk-leisure-sector-in-2026","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/669463\/","title":{"rendered":"How to profit from the UK leisure sector in 2026"},"content":{"rendered":"

The leisure sector is but part of the gigantic services sector, which accounts for roughly 80% of UK GDP<\/a>. The latter encompasses everything from professional services such as solicitors and accountants, to restaurants and coffee shops, banks and everything in between. As a result, the entire sector is connected to the consumer in one way or another. Whether it\u2019s the waiter in the restaurant, or the highly-paid accountant that works for a US investment bank who buys a \u00a315 lunch every day, the services sector, the consumer and leisure spending all go hand in hand. To put a number on it, consumer spending accounts for about 60% of UK national output, with the bulk of this generally described as non-discretionary spending on items such as food and drink.<\/p>\n

Around 10% of the UK\u2019s workforce is employed in what you could call the \u201cdiscretionary\u201d leisure sector, which encompasses businesses such as pubs and restaurants, hotels, travel-related firms, gyms and other similar businesses. A large segment is the travel sector, which, according to government figures, is worth around \u00a370 billion a year, split roughly in half between domestic travellers and international visitors.<\/p>\n

Challenging years for the UK leisure sector<\/p>\n

The past year and a half has been a tough time for the UK leisure sector. It is highly dependent on the health of the consumer, both financially and in terms of confidence. Most data and surveys show they are becoming more cautious with their money, so they\u2019re prioritising non-discretionary spending. Consumer spending tends to rise when consumers perceive their discretionary income to be increasing. When consumers perceive that to be declining, they stop spending, and that\u2019s bad news for the leisure sector.<\/p>\n

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The latest data from Barclays<\/a> on consumer card spending shows that it fell 1.1% year on year in November \u2013 the largest fall since February 2021. A survey from the British Retail Consortium<\/a> trade body showed spending at big retailers rose by 1.4% in annual terms in November, the slowest growth since May. Consumer spending on leisure was relatively stable in the run-up to the pandemic, before dropping off a cliff in the first quarter of 2020, according to Deloitte. Sentiment and spending bounced back in 2021, but since May 2020, consumers have remained cautious due to rising prices, stagnant wages and political uncertainty. Analysts expect this trend to continue. According to the Office for Budget Responsibility and the Institute for Fiscal Studies, consumer discretionary income is expected to rise by just \u00a3100 a year, or thereabouts, until the end of the decade.<\/p>\n

As spending has stagnated, costs have continued to rise. Energy, <\/a>tax and wage costs have all risen substantially over the past three years, and it doesn\u2019t look as if that is going to come to an end any time soon. In the Autumn Budget<\/a>, the chancellor announced the national living wage would rise by 4.1% in April to \u00a312.70 per hour, while the hourly national minimum wage would rise by 8.5% to \u00a310.85. This followed a near 10% increase in the national living wage for workers over the age of 21 in 2024, which, when combined with the increase in employers\u2019 national insurance<\/a>, sent the cost of labour skyrocketing in the labour-intensive service sector.<\/p>\n

Changes to business rates<\/a> announced in the Autumn Budget are also going to increase the tax burden on businesses next year. The government claims it is keeping the increases down for the hospitality sector by phasing in the changes over three years, but the UK Hospitality trade body estimates that an average pub will pay \u00a312,900 more over the next three years, while an average hotel will pay \u00a3205,200 more. Days after the Budget, Whitbread, the owner of the Premier Inn chain, said the changes would push costs higher across the business by 7% to 8%, giving investors some idea of what\u2019s in store for the sector next year.<\/p>\n

With these headwinds buffeting the sector, it\u2019s no surprise that equities in the sector have fallen by an average of 1.6% year to date compared with a 7.6% return for the FTSE<\/a> All-Share index. However, despite the doom and gloom, on an underlying basis, companies seem to be managing. Trading has held up and margins have improved thanks to operational efficiencies and the implementation of new technologies. As a result, the sector is cheaper than it was at the beginning of the year, trading at an enterprise value to Ebitda ratio<\/a> of 6.4 times, compared with 7.4 times at the start of the year, and a p\/e ratio <\/a>of 11.8 times compared with 13.5 times, according to Panmure Liberum. There\u2019s also growing evidence that consumers are in a far better position to spend as we head into the new year.<\/p>\n

Consumers seem to be spending regardless<\/p>\n

\n

\"Shoppers\n<\/p>\n

(Image credit: CARLOS JASSO \/ AFP via Getty Images)<\/p>\n

The average UK consumer, while not spending as much as the leisure sector would like, has a strong balance sheet<\/a>. The percentage of disposable income that\u2019s not spent on consumption (ie, is saved) rose to 10.7% in the second quarter, above the three-year pre-pandemic average of 5.6%, according to the Office for National Statistics<\/a>. So consumers have money to spend if they want to spend it. There\u2019s also been a shift in how consumers want to spend their money over the past three years, as the world has bounced back from Covid.<\/p>\n

Consumers want to spend money on experiences, and are more than happy to pay for a one-off, unique experience that they can\u2019t replicate. They also appear to be more willing to spend on big-ticket events and experiences. According to the YouGov GB Dining Out Report<\/a> in October, 38% are eating out less than they did a year ago. Even for higher-income diners, that number is 29%. But a recent report by Bloomberg<\/a> cited examples such as Hawksmoor and Gordon Ramsay restaurants, as well as high-end Michelin-star restaurants, that are recording bookings far in excess of last year\u2019s figures, in some cases by as much as 30%.<\/p>\n

And reading through the recent trading statements of companies in the sector, it\u2019s clear consumers are spending more when they do put their hands in their pockets. Mitchells & Butlers <\/strong>(LSE: MAB)<\/strong><\/a>, JD Wetherspoon <\/strong>(LSE: JDW)<\/strong><\/a>, Fuller\u2019s <\/strong>(LSE: FSTA)<\/strong> <\/a>and Young\u2019s <\/strong>(LSE: YNGA)<\/strong><\/a> have reported like-for-like sales growth of 3.8%, 3.7%, 4.6%, and 4.2% respectively in the run-up to Christmas \u2013 all ahead of the market. Young\u2019s and Fuller\u2019s are particularly notable, as they are more of a premium offering than the rest of the market.<\/p>\n

Then there\u2019s the data from travel company On the Beach<\/strong> (LSE: OTB)<\/strong><\/a>. Alongside its results for the year to the end of September 2025, it said it expected a record summer in 2026, with 8% year-on-year growth, following 11% growth in 2025. Winter 2025 forward bookings were up 15%, it said, with four- and five-star holidays now accounting for 80% of the total. EasyJet <\/strong>(LSE: EZJ)<\/strong><\/a> has reported that 80% of its bookings are sold for 2026, with prices up by double-digits. It expects a 15% rise in customer numbers in 2026.<\/p>\n

Everyman Media Group <\/strong>(LSE: EMAN)<\/strong><\/a>, the operator of luxury cinemas, has said that while the UK box office has been \u201cweaker than expected\u201d in the fourth quarter, it has seen increased spending per head among customers visiting its venues. For the 26 weeks ended 3 July 2025, ticket prices and food and drink spending per head rose around 6% year on year.<\/p>\n

Next<\/strong> (LSE: NXT)<\/strong><\/a>, often considered the bellwether of the UK retail sector, has smashed its own expectations for growth this year. Over the 13 weeks to 25 October, full-price sales were up 10.5%, ahead of guidance of 4.5%. International growth helped, but full-price sales in UK stores rose by 4.3% and online sales by 8.7%. There\u2019s even data showing that consumers are willing to pay more for everyday essentials. According to Which magazine, Ocado<\/strong> (LSE: OCDO)<\/strong><\/a>, one of the most expensive supermarkets, ended its half-year to the beginning of June as the UK\u2019s fastest-growing grocer over the previous 12 consecutive months. Revenue rose 16.3%, ahead of the market, as order volume per week jumped 14.7% and the average value of a basket of goods grew by 0.7% to \u00a3124.19.<\/p>\n

Investors cannot ignore the cold, hard sales figures on the ground. All of these companies are recording robust growth that runs counter to the overarching narrative presented by surveys and the media. This suggests that some of the doom and gloom on the UK leisure sector is sentiment- and confidence-driven rather than an accurate reflection of spending patterns. Now could be the time for investors to leap in.<\/p>\n

Leisure stocks are going cheap<\/p>\n

\n

\"Marston's\n<\/p>\n

(Image credit: Mike Kemp\/In Pictures via Getty Images)<\/p>\n

The good news for investors is that some of the most attractive leisure stocks are currently trading at deeply discounted multiples, most likely a reflection of the poor sentiment towards the sector and consumer spending. This means there\u2019s already a strong margin of safety baked into the names, limiting the downside if the environment is worse than trading updates suggest.<\/p>\n

Marston\u2019s<\/strong> (LSE: MARS)<\/strong><\/a> is one company that stands out in particular. Trading on a forward p\/e multiple of seven for 2025, falling to 6.4 for 2026, you would think the company is struggling, both in terms of growth and financial sustainability. However, it recorded a 71.3% increase in profit before tax in its latest preliminary results. Sales increased 1.6% on a like-for-like basis, and its Ebitda <\/a>margin expanded 140 basis points. Over the past two years, the company has seen a substantial decrease in net debt and interest costs as a result, with borrowing now down at 4.6 times Ebitda compared with management\u2019s target of four. Free cash flow<\/a> is in the region of \u00a350 million, putting shareholder returns firmly on the radar for the first time in recent memory. The pubs and bars group is expected to report its Christmas trading in January 2026, but it has already said that Christmas bookings were up 11% on last year\u2019s levels at the end of November. This is one stock that could see a substantial re-rating if the market comes to appreciate its turnaround story, valuation and growth potential.<\/p>\n

Profiting from salad<\/p>\n

Self-help initiatives always help unlock value for shareholders and catalyse a re-rating of undervalued equities. SSP Group <\/strong>(LSE: SSPG)<\/strong><\/a> sits on the edge of the UK leisure sector with a large international business, but is worth considering, with multiple levers to unlock value. The group, which owns brands such as Upper Crust and franchises including M&S and Burger King, runs concessions mainly at travel hubs worldwide \u2013 it\u2019s the world\u2019s second-largest operator in the space. SSP\u2019s latest trading update recorded revenue growth of 6%, with especially strong performance in North America and weakness in continental Europe. Management has commissioned several strategic reviews of the portfolio recently, including a review of its Continental European Rail, a perennial underperformer. The group also holds a 50.1% stake in an Indian joint venture, Travel Food Services<\/strong>.<\/p>\n

The latter listed in India last year and is trading at a higher valuation than its parent company K Hospitality. With Indian listing rules requiring a 25% free float in three years from listing (it listed with a 13.8% free float), SSP could sell some of its stake over the coming years, unlocking cash for investors. The sale of the firm\u2019s underperforming businesses, as well as unlocking cash from Travel Food, are both potential catalysts for the stock, currently trading at a forward p\/e of just 12.4. That\u2019s also relatively cheap for a company that generates a pre-tax <\/a>return on capital employed \u2013 a measure of profit for every \u00a31 invested in the business \u2013 of 18.7%.<\/p>\n

At the smaller end of the spectrum, Tortilla Mexican Grill<\/strong> (LSE: MEX)<\/strong> <\/a>is worth a look. The company has a market capitalisation of just \u00a316 million, so it\u2019s probably not suitable for every investor, but it\u2019s the fastest-growing business in the UK casual dining and leisure sector. The company recorded like-for-like sales growth of 7% in its latest trading update, more than double the market average, and it\u2019s moving rapidly towards sustainable profitability as its store roll-out continues. The company, which creates \u201cfreshly made, award-winning California-style Mexican burritos and tacos\u201d, has been leaning into the demand from UK consumers for healthy fast food. It launched a new menu, including items such as salad and protein pots, over the summer, and demand has been brisk, with salad volumes up 133% and protein-pot sales hitting \u00a3100,000 in the first eight weeks. Other new menu items are planned, as well as expansion into new markets. It\u2019s rolling out new kiosks and has launched a franchising initiative with SSP.<\/p>\n

However, it is struggling to digest its French business, Fresh Burritos, acquired in July 2024 for \u20ac3.9 million. An overhaul of the acquired brands is running behind schedule, and costs are growing, but it has given Tortilla a platform for growth within Europe. As these costs tail off, Panmure Liberum expects the business to earn its first profit of \u00a31.6 million next year, rising to \u00a34 million in 2027 as store openings continue. That would put the shares on a forward p\/e of just five, dirt cheap for a company earning a return on capital employed (Roce) <\/a>of 24% on its established UK arm.<\/p>\n

On the Beach<\/strong> (LSE: OTB)<\/strong> <\/a>is another operator with plenty of levers to pull to drive growth. As noted, holiday bookings are tracking much higher year-on-year, with consumers increasingly prepared to spend more. The company is also launching into new markets such as the Republic of Ireland, together with city breaks and cruises, to help complement its core beach-holiday arm (92% of business currently). The new city-breaks arm contributed 2% of the overall group\u2019s 11% increase in total transaction value in fiscal 2025, highlighting the demand in this market. On the Beach\u2019s cruise business is too new to judge at this stage, but this is a tried-and-tested market where the firm should be able to leverage its existing brand recognition to win further wallet share with existing customers. Analysts at Berenberg expect the company\u2019s sales to rise 14% in 2026 and then 16% in 2027, driven by these initiatives and increasing customer spending. At the same time, they\u2019ve pencilled in Ebit margin expansion from 24.7% in 2025 to 27.7%. Put all of the above together and the bank has pencilled in a p\/e of 10.1 for fiscal 2026 and 8.1 for fiscal 2027.<\/p>\n

Leveraging AI<\/p>\n

Hostelworld Group <\/strong>(LSE: HSW)<\/strong> <\/a>is a tech company masquerading as a leisure stock and is the world\u2019s leading hostel-focused online booking platform. After building a solid growth platform over the past five years, the company is now midway through a plan to boost its exposure to customers earlier in the planning phase of their trips, leaning into the growing demand for experiences when travelling.<\/p>\n

To that end, it recently acquired OccasionGenius, a US-based business-to-business event discovery platform. The platform leverages AI <\/a>and technology, augmented with a human oversight layer, to aggregate resources, including national ticketing sites such as Eventbrite, Ticketmaster and thousands of \u201cmicro\u201d sources, including local calendar sites and social media, to create marketing-ready content for its customers (such as hotels, dating apps and airlines).<\/p>\n

Hostelworld has laid out plans to double OccasionGenius\u2019s exposure, although it\u2019s not expected to contribute meaningfully to the group\u2019s bottom line in the near term. Expansion, plus increased booking demand, is expected to send sales up from \u00a395 million to \u00a3118 million by 2027 and Ebit from \u00a315.3 million to \u00a322.5 million. However, what\u2019s really notable is the group\u2019s cash generation. The group is expected to move from a net debt to a net cash position of \u00a321.4 million by 2027, compared with its current market value of \u00a3155 million. As such, on a net cash basis, the stock is trading at a sub-ten forward p\/e ratio.<\/p>\n

This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription<\/strong><\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"The leisure sector is but part of the gigantic services sector, which accounts for roughly 80% of UK…\n","protected":false},"author":2,"featured_media":669464,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,4],"tags":[748,393,4884,1144,712,16,15,1764],"class_list":{"0":"post-669463","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uk","8":"category-united-kingdom","9":"tag-britain","10":"tag-england","11":"tag-great-britain","12":"tag-northern-ireland","13":"tag-scotland","14":"tag-uk","15":"tag-united-kingdom","16":"tag-wales"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115826814182912214","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/669463","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=669463"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/669463\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/669464"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=669463"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=669463"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=669463"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}