Resilience and creativity key to sector’s success

The hospitality sector has shown its resilience over the past year, with innovative and creative responses to its many challenges, according to the Hospitality in 2025 – a sector under the cloche?’ study from Moore Kingston Smith.

The group reported that investors remained attracted to the sector, with “significant” M&A activity in the past year and investment volumes back at pre-pandemic levels. While 2025 has seen a slight reduction in quarter-on-quarter activity, the full year looks on track to exceed 2024’s numbers.

The number of transactions involving pubs, bars, and fine and casual dining establishments, has

remained relatively constant over the last three years. However, since mid-2024, the group had seen increasing appetite from acquirers for hotel and other leisure deals.

Peter Davies, Partner, Hospitality, Moore Kingston Smith, said: “Amid these challenges, important opportunities have emerged. Consumer appetite for meaningful experiences remains strong. Spending may be cautious but it is increasingly value-driven, favouring authenticity, quality and personalisation.

“Businesses offering distinctive, experience-led hospitality – whether through boutique stays, experiential dining or wellness-oriented leisure – continue to outperform. Similarly, the shift towards sustainability presents a both reputational and operational upside, as customers gravitate toward environmentally responsible brands.

“Managing workforce issues is also vital. Hospitality businesses are people businesses. Those forward-thinking employers who actively engage with their employees to promote autonomy, better mental health, appropriate rewards and improved team cultures, and offer career development pathways are well-placed to see lower levels of employee churn than their competitors.”

In April the group launched the Moore Kingston Smith Hospitality Sector Index. The HSI compares changes (on a like-for-like basis) in revenues and hours worked relative to the prior month, offering a broad indication of productivity changes on a month-by-month basis.

While the HSI is still in its infancy, the data revealed that, throughout the spring and into the summer, the hospitality sector made month-on-month improvements in productivity in an attempt to counter the impact of the government led increases in employment costs.

However, the August data suggested that the scope to continue to manage costs by reducing working hours was limited and could no longer keep pace with changes in revenue, leading to a decline in productivity. The company expected this trend to continue through the autumn months.

The report highlighted how AI could be partner in operations, driving efficiency when backed with the expertise of the operator, by automating repetitive tasks, spotting patterns and anomalies and forecasting sales and labour.

John Williams, Employment Tax Director, Moore Kingston Smith, highlighted methods by which companies could mitigate increased costs and shore up profit margins, including implementing salary sacrifice schemes, considering their workforce structure and utilising the employment allowance.

Davies concluded: “Ultimately, the sector’s outlook hinges on balancing financial resilience with creativity: meeting evolving consumer expectations and investing in employee engagement, while navigating a still fragile economic landscape.”