Hospitality and Leisure: Now is the time to laser focus on real-life opportunities

This article was originally published in Propel in April 2026.

Hospitality and leisure businesses may feel like the world has been on pause to assess the impact of the Middle East conflict. However, in more general terms, investor interest has actually been shifting back toward real‑world, operational businesses.

This is a positive sign for the sector, with last year’s investment focus on technology and healthcare services easing. Capital is now moving toward consumer industries like hospitality and leisure, the "in-real-life trade", which are viewed as more resilient to AI‑driven disruption. Lending institutions, too, are showing stronger support across restaurants, QSR, pubs, bars, and competitive socialising, with funding coming from high street banks, challenger banks, and private credit funds across a combination of bilateral and club deals. Much of this capital is aimed at supporting growth and rollout plans, which should underpin future deal activity. This was graphically illustrated with Butcombe Group recently unveiling a refinancing supported by Barclays, Lloyds, and NatWest.  

The conflict in Iran is expected to raise energy costs and has reduced expectations of near‑term interest rate cuts. Renewed inflationary pressure is a concern, as are potential supply‑chain disruptions – who knew that almost a third of the world’s fertiliser passed through the Strait of Hormuz – and the effect of all this on consumer confidence. It is still too early to quantify the full impact, but these issues remain front of mind for operators, lenders, and investors. This latest situation follows several years of volatility, and the possibility of further cost increases means businesses are preparing for a more cautious trading environment.

There are, however, several counterbalancing factors. The government’s spring statement introduced minimal change, which the market has welcomed. As above, investor sentiment has, to a degree, shifted toward tangible, people‑focused businesses that serve the real‑life economy. Concerns about AI disruption in other sectors are reinforcing the appeal of hospitality and leisure, where human interaction and experience is central (and difficult to replace with AI). Major upcoming sporting events, including the World Cup, should provide a boost—particularly for pubs, but also for restaurants due to later match times. The Middle East conflict may also prompt increased inbound tourism and a rise in staycations, supporting summer trading, as well as a potential influx of capital from investors from that region to the U.K., as a comparatively safer haven (the notable recent example being Abu Dhabi-based DIAFA’s acquisition of Richard Caring’s restaurant business). These dynamics collectively create a more favourable backdrop than headline geopolitical risks may suggest.

Operators remain aware that staying at home is a strong competitor. The at‑home dining experience continues to improve, supported by delivery platforms, meal kits and rapid grocery services. As a result, the best operators are focused on delivering service and value that exceed that benchmark and cannot be replicated at home. While over‑cutting labour in a way that risks the guest experience and deters repeat visits, or underinvesting in training or service design, remain the very real enemy to brand equity, businesses continue to seek accretive efficiencies – including exploring practical AI-use cases that deliver genuine operational benefit. The challenge is distinguishing between tools that create measurable value and those that simply add complexity.

An increasingly disciplined approach to site portfolios is essential. Site economics continue to shift, and smaller units are becoming harder to justify. Operators are applying greater scrutiny to rollout plans and upcoming lease renewals to determine which locations continue to be viable and attractive. They are understandably thinking long and hard before committing to new leases, including assessing the potential downside scenario in the event of any further external economic shocks. Footfall patterns have changed, hybrid working has altered weekday demand, and some secondary locations no longer support the economics they once did. Businesses that actively manage their estates – rather than allowing leases to drift – will be better positioned to protect margins.

There are dynamics in play that mean we can anticipate a more active deal environment than the broader macro-narrative might imply. High‑growth concepts with strong returns on capital will continue to attract buyers, regardless of market conditions, and opportunistic trade buyers are active, seeking to acquire brands that complement their portfolios. Young’s recent acquisition of Cubitt House is a case in point, and an example of a trade buyer backing a high-quality leasehold operator. Some long‑held, high‑quality businesses are now coming to market as shareholders accept valuations below previous peaks but still sufficient to deliver acceptable returns. Private equity firms with long-held assets may also transact at lower prices to return capital to investors or redeploy funds.  

We also understand that a number of company refinancing deadlines will come up this year. While liquidity in the debt market should allow many businesses to refinance, some may be unable to do so, prompting investors to plug the gap with equity or sell the business (potentially as part of a broader restructuring). Current pressures suggest restructuring activity will continue to rise, particularly among operators with weak balance sheets or underperforming estates.

Overall, while the medium- and long-term impact of the Middle East conflict remains uncertain and may delay decision‑making in the short term, the renewed investor focus on real‑life, experience‑led businesses is a constructive trend for the industry, for the year ahead. The sector has demonstrated resilience through multiple shocks, and the combination of investor appetite, lender support, and consumer demand for experiences provides a solid foundation for future investment activity.

Graeme Smith and Craig Rachel lead the hospitality corporate finance team at AlixPartners.