Hospitality Sector Index

The latest Hospitality Sector Index from Moore Kingston Smith reported that August’s performance reflected a hospitality sector navigating two contrasting realities.

On the surface, trading softened across much of the market as consumers embraced the peak summer holiday period, directing discretionary spending towards overseas travel, domestic tourism and leisure experiences. Revenue declined month-on-month across all major sectors, continuing a seasonal trend that traditionally sees trading activity diffuse away from urban centres and routine hospitality occasions.

Beneath the headline revenue figures, however, sits a far more encouraging story.

This month sees the introduction of Revenue per Labour Hour (RPLH) as a core Hospitality Sector Index measure and it immediately highlights one of the most important developments within the sector today. Businesses are becoming significantly more effective at converting labour investment into commercial performance. Against a backdrop of higher wage costs, increased National Insurance contributions and continued margin pressure, operators are demonstrating discipline in labour deployment without materially compromising customer experience.

Fine Dining remains the standout performer. Revenue increased by 10.25% compared with August 2025 whilst labour hours declined by 3.42%, resulting in a 14.16% improvement in Revenue per Labour Hour. The data suggests premium hospitality continues to benefit from experience-led spending, resilient international tourism and strong demand for special occasion dining.

Pubs & Bars also delivered encouraging annual growth despite a difficult month-on-month comparison. Whilst August’s holiday period reduced footfall across some city-centre locations, regional and suburban venues benefited from staycation demand and local leisure spending. Hotels demonstrated continued resilience, maintaining revenues broadly in line with prior-year performance whilst generating further productivity improvements through disciplined labour management.

The greatest pressures continue to be felt within Casual Dining, where consumers remain increasingly selective regarding everyday dining occasions. The structural challenge facing the sector remains unchanged, with many mid-market operators competing simultaneously against premium experiences and value-led alternatives.

Regional performance reflected wider tourism trends throughout the summer.

Destinations outside London generally benefited from domestic tourism and holiday activity, whilst several London markets experienced temporary seasonal softness. Fine Dining remained the notable exception, with Central London continuing to outperform due to international visitor demand and corporate activity.

As hospitality enters the final quarter of 2026, productivity, retention and workforce effectiveness are increasingly becoming the defining themes for successful operators. Whilst revenue growth remains important, the ability to maximise performance from every labour hour worked may prove to be one of the sector’s most important competitive advantages.

Revenue per labour hour: a new measure for a new hospitality landscape

This month marks a significant milestone for the Hospitality Sector Index with the introduction of Revenue per Labour Hour (RPLH).

Historically, hospitality performance has largely been measured through revenue growth, labour cost percentages and profitability. Whilst all remain important measures, none fully explain how effectively an organisation converts labour investment into commercial output. Revenue per Labour Hour provides that missing perspective.

The metric combines revenue performance and labour deployment into a single measure, enabling operators to understand how efficiently teams are generating sales whilst maintaining guest experience and operational standards.

Its importance has increased substantially during 2026. Few sectors have experienced the same level of employment cost inflation as hospitality. Rising National Living Wage rates, increased employer National Insurance liabilities and continued recruitment costs have all placed pressure on margins. In response, operators have focused heavily on workforce planning, scheduling accuracy, multiskilling and productivity improvements.

Hospitality Sector Index insight

The businesses creating the greatest long-term value are not necessarily those delivering the highest sales growth, but those generating the greatest return from every labour hour invested.

The results reveal clear differences in sector performance.

Fine Dining’s productivity gains demonstrate both commercial strength and operational discipline. Hotels maintained revenues whilst reducing labour investment. Pubs & Bars improved efficiency despite seasonal volatility. Casual Dining remains the only segment slower to translate labour management into improved productivity, reflecting wider structural challenges affecting the segment.

Looking ahead, Revenue per Labour Hour is likely to become an increasingly important measure of operational health. In an environment where labour represents one of hospitality’s largest controllable costs, productivity may ultimately prove to be a stronger indicator of long-term sustainability than revenue growth alone.

Fine dining, casual dining and pubs –August 2026

Fine dining

Fine dining experienced a modest seasonal slowdown during August, with revenue declining by 5.22% compared with July whilst labour hours reduced by 4.58%.

Whilst softer than the previous month, the performance largely reflects expected seasonal patterns rather than any underlying deterioration in demand. August remains one of the busiest travel periods of the year, and many higher-spending consumers prioritise overseas holidays, festivals and leisure experiences over local dining occasions.

The annual picture tells a far stronger story.

Revenue increased by 10.25% compared with August 2025 whilst labour hours declined by 3.42%, producing a significant 14.16% increase in Revenue per Labour Hour. This represented the strongest productivity performance of any sector within the Index and reinforces the continued resilience of premium hospitality.

Consumers appear increasingly willing to spend on memorable experiences whilst becoming more selective about routine discretionary purchases. Fine Dining operators have benefited from this behaviour, particularly those offering chef-led experiences, tasting menus, premium wine programmes and destination dining occasions.

Central London continued to lead performance, delivering annual revenue growth of 17.78%.

International tourism remains an important contributor. The capital continues to benefit from inbound visitors, corporate entertaining and business-related dining activity. Unlike many mainstream dining occasions, premium hospitality continues to attract consumers seeking exclusivity, quality and memorable experiences.

Importantly, the productivity improvements observed within Fine Dining suggest strong labour management rather than simply higher pricing. The combination of revenue growth and reduced labour hours indicates operators are becoming increasingly effective at deploying talent where it generates the greatest impact.

As the autumn corporate season approaches, premium operators appear well positioned to maintain momentum through a combination of business dining, experiential spending and continued international demand.

Casual dining

Casual dining remains the most challenged segment within the hospitality market.

Revenue declined by 4.89% month-on-month during August whilst labour hours reduced by 1.92%. Consumers continue to demonstrate caution when making discretionary spending decisions, particularly regarding routine dining occasions.

The annual comparison remains equally challenging.

Revenue declined by 5.77% against August 2025 despite labour hours reducing by 8.26%. Whilst a 2.72% improvement in Revenue per Labour Hour reflects the success of operators’ labour management initiatives, underlying demand remains subdued, highlighting the ongoing challenge of driving customer growth.

At the heart of the issue lies changing consumer behaviour.

The middle of the market remains squeezed between two distinct spending trends. At one end, premium hospitality continues to benefit from experience-led spending. At the other, value-led operators attract increasingly price-sensitive consumers. Many casual dining businesses find themselves caught between both propositions.

The weakest annual performance came from North West London and Central London, where revenues declined by more than 10%.

Industry commentary throughout 2026 has increasingly highlighted a growing “missing middle”. Consumers are still spending, but they are becoming more selective regarding where and why they choose to spend. Businesses that fail to clearly articulate their value proposition risk losing relevance to brands positioned more distinctly at either end of the market.

However, opportunities remain.

Consumer demand has not disappeared. Rather, it has become more intentional. Operators that successfully align menus, pricing, service levels and customer experience with changing expectations remain well positioned for recovery.

The challenge for casual dining is no longer simply attracting customers. Increasingly, it is giving customers a compelling reason to choose them over alternative hospitality and leisure options.

Pubs & bars

Pubs and bars recorded the largest month-on-month revenue decline amongst the restaurant sectors, with revenue falling 9.35% during August.

Whilst initially appearing concerning, the result should be considered within the context of seasonal travel patterns and a comparatively strong July.

The most pronounced weakness occurred within Central London, where revenues fell 37.74% month-on-month. The decline appears reflective of reduced urban footfall as consumers travelled to holiday destinations during the peak summer period.

Conversely, regional locations thrived.

Sites outside London achieved revenue growth of 17.31%, benefiting from domestic tourism, staycation demand and increased leisure travel throughout the school holidays.

The annual outlook remains considerably more positive.

Revenue increased 6.06% compared with August 2025 whilst labour hours remained stable. As a result, Revenue per Labour Hour continued to improve, demonstrating the sector’s ability to adapt labour investment in line with demand.

Particularly noteworthy was South East London’s 35.10% annual revenue growth.

Neighbourhood and suburban venues continue to outperform expectations, benefiting from local loyalty, convenience and regular visitation patterns. These locations often experience less volatility than destination-led city-centre sites and have become increasingly important contributors to overall sector performance.

The results reinforce the strength of community-led hospitality. Consumers continue to value informal social occasions, local experiences and venues that provide a sense of connection and familiarity.

Despite August’s seasonal softness, the longer-term picture remains encouraging. Pubs continue to occupy a unique position within the hospitality landscape, combining affordability, social connection and community engagement in a way few leisure sectors can replicate.

Hotels – July 2026*

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

Hotels experienced a modest slowdown in July, with revenue declining by 3.35% month-on-month and labour hours reducing by 2.59%.

Much like other hospitality sectors, performance was heavily influenced by changing travel patterns during the peak holiday season.

Regional destinations benefitted significantly from domestic tourism. School holidays, leisure travel and short breaks all contributed to stronger demand outside London, where hotel revenues increased by 8.74%.

Urban locations faced greater challenges.

South East London hotels experienced a 19.27% decline in revenue compared with the previous month, reflecting reduced business travel and temporary shifts in leisure demand away from city centres.

Despite these movements, annual performance remained remarkably resilient.

Revenue was broadly unchanged compared with July 2025 whilst labour hours reduced by almost 4%, resulting in a 3.93% increase in Revenue per Labour Hour.

This productivity improvement is particularly significant given rising employment costs. Hotel operators have increasingly focused on workforce planning, operational efficiency and demand forecasting to maintain profitability without compromising guest satisfaction.

The ability to maintain revenues whilst reducing labour investment highlights the growing sophistication of workforce management across the sector.

As the market moves into autumn, business travel, conferences, corporate events and international tourism are expected to become more significant demand drivers. This transition will provide an important test of operational agility and labour productivity.

People spotlight: Retention, leadership and productivity

If 2024 and 2025 were defined by recruitment challenges, 2026 is increasingly becoming the year of retention.

Throughout much of the hospitality industry, the conversation has shifted away from simply attracting employees and towards keeping them.

This evolution is both practical and commercial.

Labour shortages have eased in many locations, but employment costs remain elevated. Replacing experienced employees is expensive. Recruitment fees, onboarding, training, reduced productivity and service inconsistency all create costs that rarely appear directly within payroll budgets but have substantial operational consequences.

The August data reinforces the value of workforce stability.

The sectors delivering the strongest Revenue per Labour Hour improvements are also those most likely to benefit from experienced teams, strong management capability and lower employee turnover. Productivity gains of the scale seen within Fine Dining are difficult to achieve without a stable and engaged workforce.

Employee engagement is increasingly becoming a commercial issue rather than purely a people issue.

Businesses are recognising that retention contributes directly to guest satisfaction, revenue growth and profitability. Employees who remain longer frequently develop stronger customer relationships, deeper operational knowledge and greater confidence in delivering service standards.

The leadership pipeline is becoming equally important.

Many hospitality organisations are investing heavily in first-line manager capability, recognising that employee retention is often driven by local leadership rather than corporate policy. Strong managers improve engagement, coach performance and create working environments where employees are more likely to stay.

There are also encouraging signs that businesses are taking a broader view of the employee experience.

Flexible working arrangements, structured career pathways, wellbeing support, learning opportunities and recognition programmes are increasingly viewed as long-term business investments rather than discretionary benefits.

The relationship between retention and productivity is likely to become even more important throughout 2027. As labour costs continue to rise, organisations that create engaged and stable workforces are likely to outperform those relying on continual recruitment to fill vacancies.

As Revenue per Labour Hour becomes a more widely accepted measure of success, organisations may find an important truth emerging: sustainable productivity is not achieved simply by reducing labour hours. Instead, it is achieved by creating engaged, experienced and high-performing teams capable of delivering more value every hour they work.

September outlook

The hospitality sector enters September with cautious optimism.

The end of the summer holiday period should support the return of more normalised trading patterns across city-centre locations and business districts. Corporate travel, conferences and business dining are expected to increase as organisations return to regular operating rhythms after the summer period.

A key theme to watch will be the recovery of urban footfall, particularly within London markets that experienced seasonal softness during August.

Consumer behaviour will also remain under close scrutiny. Whilst spending patterns have proven resilient in premium hospitality, the extent to which consumers return to more regular dining, drinking and travel occasions will provide valuable insight into wider confidence levels heading into the final quarter of the year.

From an operational perspective, Revenue per Labour Hour will become an increasingly important measure. August’s results suggest significant progress is being made in workforce productivity, but September will provide further evidence as to whether these improvements represent a lasting trend.

Employee retention is also likely to move higher on leadership agendas as businesses begin planning for the important Christmas trading period. Organisations with strong workforce stability and effective labour planning are likely to enter the final quarter in the strongest position.

The combination of improving productivity, resilient premium demand and the return of business activity provides reasons for cautious confidence. However, continued cost pressures and evolving consumer behaviour mean operators will need to remain disciplined, agile and focused on delivering value to both customers and employees.