Hospitality Sector Index

July highlighted the increasingly selective nature of consumer spending across the hospitality sector, according to the latest Moore Kingston Smith index. Despite warm weather, the closing stages of the FIFA World Cup, peak tourism activity and the start of the school summer holidays, trading conditions failed to deliver universal growth.

Casual dining delivered its strongest performance of the summer, hotels maintained positive momentum and fine dining remained resilient. In contrast, pubs and bars produced one of the most surprising results of the year, with sales declining despite conditions that would historically support strong trading.

The results suggest consumers continue to spend, but are becoming increasingly selective about where, when and why they spend. Experience-led occasions, family outings, tourism activity and destination dining remain key demand drivers. However, routine discretionary occasions remain under pressure as households continue to balance living costs against leisure spending.

A notable feature of July was the divergence between sectors that benefited from tourism and family activity and those more reliant on habitual spending. Casual dining and hotels captured increased footfall from visitors and holidaymakers, while pubs struggled to convert favourable external conditions into sustained sales growth.

Industry commentary continues to highlight the impact of employment costs, National Insurance increases, business rates pressures and fragile consumer confidence. Premium operators remain more resilient than the wider market, but growth is increasingly dependent upon compelling experiences and clearly differentiated propositions.

Alongside changing consumer behaviour, productivity remains a defining theme. Operators continue to generate revenue growth with relatively fewer labour hours. While helping protect margins, this trend raises important questions around employee wellbeing, workload intensity and workforce sustainability.

Restaurants, pubs and bars –July 2026

Fine dining

Fine dining remained one of hospitality’s most resilient performers during July, although signs of moderation began to emerge. Revenue decreased by just 0.17% month on month while labour hours declined 0.42%, helping preserve productivity despite softer trading conditions.

July is traditionally a month when higher-income consumers divide discretionary spending between hospitality, overseas travel and luxury leisure experiences. Despite this, premium dining continued to attract guests seeking celebration occasions, business entertaining and destination experiences.

The annual performance remained positive. Compared with July 2025, revenue increased 0.78%, while labour hours fell 3.81%. Central London delivered particularly strong results, with revenue growing 6.91% year on year, supported by tourism, international visitors and corporate activity.

The broader industry picture suggests premium dining remains more resilient than mainstream restaurant markets. However, operators are increasingly managing rising employment, energy and occupancy costs while responding to changing dining habits. Consumers are demonstrating a willingness to spend more per visit while reducing the overall frequency of dining occasions.

Fine dining therefore remains a relative success story, but July suggests growth may be beginning to normalise after a prolonged period of outperformance.

Casual dining

Casual dining recorded its strongest month of the summer so far, with revenue increasing 3.25% and labour hours increasing 1.94%.

The improvement was driven by warmer weather, increased consumer footfall, Wimbledon, BST Hyde Park events and the start of the school summer holidays. These factors supported destination dining, family outings and tourism-led spending across many locations.

West London delivered particularly impressive results, with revenue growth of 8.14% month on month. The region benefited from international tourism, leisure activity and holiday-related demand.

July also coincided with the Government’s temporary reduction in VAT from 20% to 5% on qualifying children’s meals. While it remains too early to quantify the precise impact, the initiative was specifically designed to encourage family spending during the school holiday period and may have provided an additional incentive for family dining occasions.

Despite the monthly improvement, annual comparisons remain challenging. Revenue remained 11.15% below July 2025 levels, while labour hours declined 7.96%. The sector continues to feel pressure from highly selective consumers who increasingly choose between premium experiences and lower-cost alternatives.

Pubs & bars

Pubs and bars delivered one of the most surprising results of the month and represent the defining story of July.

Revenue declined 0.77% while labour hours increased 1.65%, despite the presence of factors that would traditionally support strong trading. Warm weather, the FIFA World Cup, longer evenings, tourism activity and a busy summer events calendar would normally provide meaningful support for pub revenues.

The absence of a broader sales uplift suggests consumer spending patterns continue to evolve. Households appear increasingly willing to spend on leisure activities, but spending is becoming more fragmented across holidays, festivals, concerts, attractions and experience-led activities.

While individual match days likely delivered strong trading spikes, these benefits appear not to have translated into consistent monthly growth across the wider market.

Regional performance tells a more nuanced story. Central London achieved revenue growth of 7.35% month on month, benefiting from international visitors, event-led activity and concentrated tourist demand. However, many locations outside major tourism hubs failed to experience the same uplift.

The annual comparison remained marginally positive, with revenue increasing 0.70% and labour hours rising only 0.16%. Productivity therefore remained broadly stable, but July raises important questions about the future reliability of traditional demand drivers within the pub sector.

While major international sporting tournaments would normally be expected to provide a significant boost to pub trading, the North American hosting format of the 2026 FIFA World Cup meant many fixtures were played late in the evening or during the early hours of the morning for UK audiences. A number of matches therefore fell outside traditional pub trading hours, potentially limiting the extent to which tournament viewing translated into sustained footfall and sales growth. At the same time, consumer leisure spending appears increasingly fragmented across holidays, festivals, concerts and other summer experiences. Together, these factors may help explain why the combination of warm weather and World Cup activity failed to generate the level of uplift many operators would typically expect from such favourable trading conditions.

Hotels – June 2026*

 *The hotel data reflects a period one month earlier than the restaurant data due to an industry reporting lag.

Hotels continued to deliver some of the strongest results across the sector. Revenue increased 13.53% from May to June while labour hours rose 4.13%, demonstrating further productivity improvements.

Performance was supported by leisure travel, corporate demand and domestic tourism. June benefited from favourable weather conditions and strong visitor activity across many destinations.

West London was particularly impressive, with revenue increasing 19.55% compared with May. Its proximity to Heathrow Airport and attractiveness to international visitors helped drive exceptional growth.

The annual picture was more measured. Revenue declined 0.46% compared with June 2025 while labour hours declined 2.96%, indicating continued efficiency gains.

Outside London, annual revenue growth of 3.91% highlights the importance of domestic tourism and regional leisure travel.

Employee wellbeing – the hidden cost of productivity gains 

One of the clearest themes emerging throughout 2026 is hospitality’s ability to generate more output from relatively fewer labour hours.

Across multiple sectors, labour deployment remains tightly controlled despite stable or improving revenues. This demonstrates strong workforce planning and operational discipline. However, productivity gains may carry hidden consequences if sustained indefinitely.

Employees are increasingly being asked to deliver high service standards with leaner staffing models. Potential risks include increased workload intensity, reduced recovery time between shifts, greater fatigue, burnout risk, increased management pressure and fewer opportunities for coaching and development.

Managers face a particularly difficult balancing act. They are required to drive performance, manage costs, maintain compliance, support wellbeing and deliver guest satisfaction simultaneously.

The sector is also navigating higher labour costs, employment reform, Day 1 rights changes and evolving workforce expectations. These factors are likely to increase focus on workforce planning, attendance management and employee experience.

The challenge for leaders is no longer simply reducing labour costs. It is maintaining productivity gains without compromising engagement, retention, service quality or wellbeing.

Leadership consideration 

July demonstrates that favourable trading conditions alone are no longer sufficient to guarantee growth.

The combination of warm weather, a major international football tournament, peak tourism and school holidays would historically have driven broad-based hospitality growth. Instead, results were mixed and highly dependent upon market segment, region and customer proposition.

Consumer demand remains present, but increasingly selective. Guests are prioritising experiences, occasions and value. Understanding where demand is moving and aligning labour, service delivery and customer experience accordingly is becoming an increasingly important leadership capability.

The organisations best positioned for long-term success are likely to be those that combine productivity improvements with investment in workforce resilience, manager capability and customer insight.

Key leadership takeaways 

• Pubs and bars delivered unexpectedly weak July performance despite favourable seasonal trading conditions.

• Casual dining benefited from school holiday activity, tourism and major summer events.

• The temporary VAT reduction on qualifying children’s meals may have supported family-focused dining occasions.

• Fine dining remains resilient, although growth appears to be moderating.

• Hotels continue to demonstrate the strongest combination of demand and productivity.

• Productivity remains a key differentiator across hospitality.

• Employee wellbeing is becoming a strategic business issue.

• Consumer spending remains selective, favouring experiences, occasions and perceived value.

• The most successful operators will balance commercial performance with workforce resilience.

  
  

Hospitality continues to demonstrate remarkable operational resilience, generating more output from fewer labour hours while navigating rising employment costs and shifting consumer behaviour. July, however, highlights a new challenge for leaders. Demand remains present, but it is increasingly selective, fragmented and difficult to predict. The organisations best positioned for long-term success are likely to be those that combine productivity, workforce resilience and customer insight to meet evolving consumer expectations without compromising employee wellbeing or service quality.