According to the report, competitive socialising has seen rapid growth in recent years, with the UK experiencing a 38% rise in these types of venues since 2018.
With more consumers attracted by in-person experiences at venues like Flight Club, Bounce, Fairgame, and the OakNorth funded F1 Arcade, the bank said it would be “keeping a keen eye” on growth in the category over the next six months.
The casual dining sector has also showed signs of recovery in recent months, despite cautious consumer spending, with the number of outlets up 1.7% over the past year to 5,167, according to the report.
OakNorth head of debt finance Ben Barbanel said: “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 more than 6,000 customer each week.
“Our recent loan to the firm will enable the business to enhance its financial strategy and continue growth through new opportunities.”
Although dining-out volumes remain below pre-Covid levels, suggesting while consumers are visiting less frequently, they are spending more per visit, OakNorth explained.
Cost-conscious customers
The bank explained just under half (46%) of consumers have cut down on discretionary spending and reduced how often they visit the on-trade, resulting in a rise in restaurant promotions to attract cost-conscious customers.
Citing figures from the Office for National Statistics (ONS) in September, which showed 52% of UK adults reported a rise in their cost of living compared to the previous month, consumers continue to remain cautious with their finance, the report added.
Major events also influenced trade within the hospitality sector over the past six months, notably sporting and music events, including the Euros, Wimbledon, Glastonbury and Taylor Swift’s Eras Tour.
This was particularly true for the accommodation sector, with hotels in Liverpool and Edinburgh for example having seen a 115% and 84% surge in prices respectively during the Eras Tour, according to OakNorth.
However, while budget locations and luxury experiences continue to perform well, the UK’s mid-market hotel segment has continued to underperform, according to OakNorth.
OakNorth also estimated acquisition-driven growth would accelerate in 2025 within the hotel segment, stating 56% of top hotel executives believe it will increase significantly over the next five years.
International investors and private equity players continue to “actively target high-potential or distressed assets within the UK pub, bar, and restaurant sectors”, the report said.
Challenges remain
However, despite higher topline growth, hospitality operators have experienced a squeeze in profits this year, OakNorth said.
Attributed to the increase to wages in April 2024 and the measures announced in the autumn Budget, the bank warned rising costs threatened jobs across the sector over the next six months.
In addition, OakNorth detailed higher employment costs following the budget could exacerbate concerns for hospitality firms and translate to higher consumer prices, potentially fuelling inflation and slowing wage growth further.
The latest data from the Office for National Statistics (ONS) showed there were 95,000 vacancies across the sector.
Barbanel continued: “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.
“The insights from our second Sector Pulse focusing on these paramount sectors demonstrate that while the summer months brought a welcome temporary boost for many, challenges remain.
“Last year, the festive season and new year celebrations were impacted by the threat of Tube strikes and mass protests against the war in Gaza, so operators will be hoping for a calmer and less disruptive period going into 2025.”
