Leisure construction buoyed by rapid growth in budget segments

In overall terms, construction activity in the entertainment and leisure sector has performed relatively well during the downturn compared with other sectors, with construction output values reaching around £5.7bn in 2013, a 14% rise on 2012. However, expansion and investment have been largely confined to the budget hotels, health and fitness and, more recently, the cinema segments, with less buoyant activity in mid-market hotels, pubs and the gaming sectors where some major operators have reigned in capital spending plans.

The largest sector within the UK leisure industry in terms of revenue is the food service industry, worth £45bn in 2014, of which sales in the restaurant and fast food sector account for over 50%. The restaurant sector has experienced a difficult trading environment over the past 5 years and the pub sector in particular has seen considerable restructuring. While spending has not reached pre-recessionary levels, consumers are returning to restaurants and refurbishment activity within the sector is largely driven by international businesses looking to expand in the UK.

After years of being constrained by capital budgets, hotels have now refocused portfolio investment through refits and refurbishment programmes to maximize occupancy levels rather than through new build properties – though the exception has been budget hotels where value chains continue to expand their portfolios through new development. Hotel construction is expected to be one of the fastest-growing sectors in 2014, boosted over the next few years by competition between budget hotel chains.

A further trend emerging from the recession is the rise in popularity of the budget gym sector, where membership prices are around 50% cheaper than for traditional clubs. As in the hotel sector, the budget gym market is forecast to increase market share as consumers look to spend existing disposable income more wisely. Many budget operators have aggressive expansion plans for 2014 and beyond.

In 2014, the fortunes of the UK leisure market are thought to have received a boost from major sporting events such as the Commonwealth Games in Glasgow, stages of the Tour de France in Yorkshire, Cambridge and London, the Ryder Cup at Gleneagles, the World Cup etc., which could have a significant positive impact on both regional and London leisure market performance. However, market performance has been uneven.

“Whilst the outlook for the hotel and leisure sector is now more positive, the implications for construction, fit-out and refurbishment work in the sector remains mixed” said Andrew Hartley, Director of AMA Research. “Significant expansion plans have been announced by budget hotels, value gym, food-led pubs and cinema sectors, contrasting with less buoyant prospects for mid-market hotels and the betting and gaming industry.“

The outlook for the hotel, leisure and entertainment sector as a whole remains positive, with annual output increases of 2-5% currently forecast to 2018. UK tourism spending is also expected to continue to grow strongly to 2025, with inbound tourism the fastest growing sector with growth rates of 5-6% forecast. Much of this growth is being driven by higher consumer spending as the economic recovery gathers pace and is becoming firmly established.

The ‘Construction in the Hotel, Entertainment & Leisure Sector Report – UK 2014-2018 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.