Hospitality and leisure sector boosts investment in the experience economy despite rising costs
Barclays’ new Hospitality & Leisure (H&L) report reveals that businesses are continuing to invest and expand, particularly in providing experience-led offerings, even as rising costs and geopolitical uncertainty impacts confidence and consumer spending.
Anonymised Barclays’ client data from 73,000 UK Hospitality & Leisure (H&L) businesses, combined with Business Prosperity research from 500 industry leaders and 2000 consumers shows how the sector is adapting quickly to harness customer demand amid a challenging operating environment.
Key findings include:
- 51 % of H&L businesses are planning to expand in the next three years
- 65 % are increasing investment in experience-led offerings
- 60 % say demand for memorable experiences is growing faster than demand for physical products
- 60 % expect the summer’s sporting, cultural and entertainment events to have a positive impact on their business
- 56 % of consumers plan to spend the same or more on experiences and events this summer
Across all H&L businesses – 88 % are confident in their prospects over the next year (in comparison to 83 % of businesses across all sectors)
Experience-led investment underpins growth strategy
Two in five (39 %) H&L businesses are focusing on improving the overall quality of the customer experience and are also investing in initiatives such as loyalty schemes or subscriptions (38 %). This reflects a broader shift in consumer preferences, as businesses look to capitalise on a packed summer of public events and sporting fixtures.
However, this proactive approach sits alongside a more cautious consumer and cost environment. Seven in 10 (72 %) consumers expect tensions in the Middle East to impact the cost of living throughout 2026, and 57 % are concerned the cost of experiences and events will climb this summer as a result.
While 45 % are responding by cutting discretionary spending or delaying major financial decisions (26 %), demand remains resilient. Many still plan to prioritise spending on experiences, with two thirds (66 %) reporting that events and experiences boost their mental wellbeing and happiness.
Customer demand for experiences is also reflected in business performance. Although the sector experienced an overall decline in cash inflows (-5.6 %), activity-led businesses such as golf courses (2.5 %) and botanical and zoological gardens (6.1 %) saw cash flows rise last quarter, pointing to sustained demand for outdoor and fitness-focused activities.
Cost pressures drive divergence in business strategy
Close to six in 10 (57 %) H&L leaders have changed their business outlook for 2026 in light of current geopolitical instability. Against this backdrop, a clear divergence is emerging in how businesses respond to cost pressures.
- 33 % report rising staff costs following increases in the National Living Wage and National Insurance contributions
- 31 % feel pressure to increase prices for customers or to accept reduced profit margins as a result (30 %)
- SMEs are taking a more cautious stance, with borrowing down 12.7 %; while savings increased 1.9 % year-on-year in Q1 (rising to 4.3 % for travel agencies and 4.6 % for tour operators)
- Conversely, larger firms have increased borrowing by 3.2 % and drawn down savings -8.7 %, potentially signalling they are operationalising capital, while a 9.1 % growth in loan volumes suggests confidence to invest
Rich Robinson, head of hospitality & leisure at Barclays, said: “Hospitality and leisure businesses are showing real resilience as they navigate higher costs and ongoing uncertainty. Our research shows many are responding by investing in the customer experience, using technology to build loyalty, and adapting their offering to meet changing expectations.
“While consumers remain selective with their spending, the appetite for memorable, high-quality experiences is clearly holding up. That presents a strong opportunity for businesses that can combine value, personalisation and operational efficiency to stand out and grow.”