Leisure and hospitality shares are trading below pre-pandemic levels but arguably the underlying fundamentals have improved. Financially strong operators have taken advantage of favourable market conditions to accelerate their expansion plans.

These include Wagamama owner Resturant Group (RTN), The Gym Group (GYM:AIM), Loungers (LGRS:AIM), and Fulham Shore (FUL:AIM).

Despite lingering impacts from the Omicron variant and rising cost inflation challenges recent data suggest the sector is still benefiting from robust pent-up demand.

For example, the Coffer CGA business tracker for managed pubs and restaurants showed February’s like-for-like trading 3% higher than pre-pandemic levels.

Strong recovery and a preference for experiential spending rather than buying ‘things’ is expected to continue to gain momentum according to research from Liberum.

This is backed up by the ONS (Office for National Statistics) based on credit card data. March spending on social activities, like going out to eat and travelling is above February 2020 levels.

By contrast spending on ‘delayable goods’ such as clothing, footwear and household goods is 20% below.

Lumina Intelligence forecasts the UK restaurant market to recover to 94% of 2019 trading by the end of 2022 with the top branded restaurants capturing around 20% annual growth and smaller groups facing a mixed recovery.

Liberum expects Restaurant Group and all-day restaurant and bar group Loungers to lead the market in sales recovery in the year ahead.

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