2023 will be a turbulent year for the leisure sector, particularly for some sub-sectors such as Food and Beverage which will be heavily exposed to rising costs and reduced consumer spend. However, the industry constantly reinvents itself by providing new offers to accommodate changes in the market which was evident during the pandemic, and we don’t expect this to be any different during 2023 as operators adapt using innovation and technology in order to survive. International tourism is predicted to continue its rebound, with major events planned for 2023 across the UK, which will result in an increase in both overseas and domestic tourist spend in the UK.
Hospitality hit by labour issues, rising costs and declining consumer spend
The Food and Beverage sector, alongside other leisure sub-sectors, will continue to struggle throughout 2023 as households rein-in discretionary spend. At the same time business owners will face continuing rises in costs such as food inflation (currently 16%*), higher energy costs and rising labour costs, which will all impacting profit margins unless these are offset by increased revenues. Few companies will be able to pass on the full extent of these cost rises to the consumer though in order to remain competitive, so there is likely to be an increase in the number of operators during the year who can’t afford to operate and who will, in turn, become casualties. UK Hospitality predict that one in ten F&B operators could fall into administration in 2023 unless there is significant government support, which is looking unlikely given the government’s mandate to reduce spend.
However, consumer behaviour has changed significantly in recent years, with the pandemic driving structural changes within the sector. Whereas, in previous recessions, consumers would cut back on eating out and other leisure pursuits, it may not be as severe in 2023.
The pandemic essentially prevented the public from taking part in social activities, so consumers are likely to place a higher importance on their social wellbeing. The pandemic also forced those in the F&B sector to find new and innovative ways of delivering enjoyable experiences, with technology playing a key role in ensuring many these operators survived the tough trading environment. Those same businesses will need to adapt effectively to the constantly changing trading environment and cope with huge rises in operating costs as well as a shrinking consumer wallet. Operators will need to look at innovative ways to reduce costs, such as the creation of cheaper, more limited menus, introducing new technology to improve efficiency or reducing trading hours during quiet periods to improve the operating model.
“2023 will remain challenging for the leisure sector, driven by the fall in consumers’ discretionary income. However, we do expect to see further innovation within the sector to adapt to ever-changing consumer trends.”
Gavin Brent, Principal , Managing Director, Leisure
UK tourism will boost the travel sector
The UK could benefit from a double-pronged upswing in revenues from tourism. Firstly, consumers looking to save money may forgo overseas holidays in favour of cheaper UK staycations – a trend we have seen over the last three years, or so, which has boosted revenues in UK tourist locations. The rising costs of overseas travel could also prove to be a particular deterrent in this regard; the price of flights and foreign hotels has risen significantly by a reported 48.5% in 2022 and is expected to increase by a further 8.4% in 2023. Hotel prices have also risen significantly, up by a reported 18.5% in 2022 with an increase of 8.2% forecast in 2023.
TOTAL DOMESTIC TOURISM SPEND
Secondly, a continued increase in inbound tourism to the UK is expected. Tourists will benefit from the lower value of the pound making the cost of goods and services cheaper, and the lifting of Covid restrictions globally should increase the number of both international tourists and business trips to the UK. There are also some major events being held in the UK during 2023, namely the coronation of King Charles which is expected to draw an influx of both overseas and domestic visitors to the capital.
Regionally, Liverpool and the surrounding areas will see a huge boost to the local economy. The British Open golf championship will be taking place at Hoylake in the Wirral and is forecast to bring in around £100 million whilst the Eurovision song contest, due to take place at Liverpool Arena, is expected bring in £30 million.
New formats and expanding operators
Although Health and Fitness operators have been vulnerable during previous recessions, there may be an increase in membership sales at budget gyms, as users of more expensive fitness centres and classes switch to cheaper alternatives to save money.
Some players have announced aggressive expansion plans despite the gloomy economic outlook. Pure Gym are looking to grow their estate from 300 gyms to between 700-900 by 2028, whilst The Gym Group have plans to grow their estate from 221 UK gyms currently, to 300 by 2025.
BoxPark, the food and leisure container park concept, which has three locations in London, will be opening at its first location outside of the capital - a 16,000 sq ft venue in the Baltic Quay area in Liverpool. Gravity Leisure will also be expanding during the year and will open a 60,000 sq ft venue in Westfield Stratford.
Shopping Centres are becoming popular locations to open leisure developments, and we expect to see more vacant units, particularly in prime locations, converted into leisure use. Land Securities, working in partnership with leisure operator Hangloose, recently launched two new attractions at Bluewater – the biggest purpose-built swing in Europe as well as ‘Skydive’ the UK’s first outdoor sky dive machines. An additional five new experiences will be launched during 2023 including a bungee tower, giant slide, clip and climb, waterdrop bouldering wall, and Via Ferrata, a routed climb embedded in Bluewater’s walls.es indicating growth rates of 10% per annum over the next five years.