Good News for the Hospitality Sector as Restaurants Edge Back Into Growth

Why It Matters

The modest sales rebound signals a shift in consumer spending toward dining out, but persistent cost pressures mean profitability is still constrained. Understanding this dynamic is crucial for investors and operators navigating the hospitality sector’s recovery.

Key Takeaways

• Restaurant sales rose 2.5% in March, outpacing pubs
• Like‑for‑like restaurant growth 0.9% versus pubs' 2.6% decline
• Total sales including new sites grew 4.3%, just above inflation
• Only 31% of hospitality leaders feel optimistic about next year
• Cost pressures from energy, wages, and rates keep margins tight

Pulse Analysis

The latest NIQ RSM Hospitality Business Tracker shows a tentative rebound for UK restaurants, with March sales up 2.5% and a 0.9% like‑for‑like increase. This growth contrasts sharply with a 2.6% drop in pubs and bars, suggesting that consumers are reallocating discretionary spend toward sit‑down meals rather than traditional drinking venues. The shift reflects broader lifestyle trends, including a preference for convenience and a lingering caution around larger tab spends amid cost‑of‑living pressures.

Expansion remains a key driver of top‑line performance. When new site openings are factored in, managed restaurant groups posted a 4.3% rise in total sales, nudging just above the current inflation rate. However, this headline figure masks the underlying strain on margins: higher food, drink, and labour costs, compounded by persistent business‑rate hikes and volatile energy prices, continue to erode profitability. Operators are therefore balancing growth ambitions with the need to control operating expenses, often turning to technology and streamlined menus to protect bottom lines.

Looking ahead, confidence in the sector is fragile. NIQ’s Business Confidence Survey reveals that only 31% of hospitality executives feel optimistic about the next 12 months, a stark reminder that the summer peak could be jeopardized without substantive relief on structural cost pressures. Stakeholders—from investors to franchisees—should monitor policy developments around energy subsidies and business‑rate reforms, as these will likely dictate whether the modest March gains can translate into sustained, inflation‑adjusted growth for the industry.