Hospitality and leisure business owners advised to act now as headwinds impact the sector

Hospitality and leisure business owners advised to act now as headwinds impact the sector

John Morgan, Commercial Property

Headwinds in the hospitality and leisure sector are leading to a surge in acquisition, disposal and refinancing activity for businesses across the North East. John Morgan, Partner in Hay & Kilner’s Commercial Property team shares his top tips on how businesses should plan ahead and bring in expert advisors in order to maximise value.

Get your house (or hotel!) in order

Before you consider a sale, refinance, expansion, or acquisition, ensure your operations and financials are in excellent shape. In the hospitality and leisure sector, this means more than just clean books — it's about guest satisfaction, reputation management, consistent service delivery, and compliance with health, safety, and employment regulations. Your physical assets (hotel, restaurant, resort, etc.) must also be well-maintained. Potential buyers or lenders will look closely at how the business runs day-to-day, so your team, systems, and guest reviews must be aligned and performing well.

Operators – Prepare at least 6 months ahead for a potential sale or any major strategic move

Operational excellence drives value in hospitality. If you’re thinking of selling or repositioning the business (e.g., rebranding or upgrading facilities), you will need at least six months to prepare. This allows you to optimise key performance indicators like RevPAR, occupancy rates and customer satisfaction. Investors and buyers pay close attention to trends over time so giving your business a chance to perform consistently is critical to maximising value.

Diversification / Expansion – Failure to prepare can lead to serious setbacks

In hospitality, expansion could mean opening a new location, entering a new market segment (e.g., wellness, coworking, entertainment), or adding new revenue streams (like F&B or spa services). In the North East, we’re seeing a lot of operators expand into areas such as glamping to increase revenue streams. Be sure you’ve done your market research, stress-tested your financial models, and built the right infrastructure to support growth as well as bringing in expert advisors. Expansion can be a game changer, or a costly distraction, depending on how well you prepare.

Refinance – Understand what the right lender needs and the true cost of capital

Hospitality businesses often have complex capital needs, from funding renovations to smoothing seasonal cash flow. When refinancing, understand exactly what lenders in this space look for. Make sure you're comparing not just interest rates but the total cost of borrowing: look at prepayment penalties and flexibility during off-peak periods. The "cheapest" loan on paper may cost more in practice if it limits your operating flexibility

Acquisition – Involve expert advisors from the beginning

If you're planning to acquire a hotel, restaurant group, or leisure property, bring in hospitality-specialist advisors early — including industry-savvy legal advisors, architects, accountants and surveyors. Hospitality M&A is not just about the numbers and getting expert input early helps you identify red flags and structure a deal that protects your long-term interests.

Get the right advisor to sort out a lease – It’s more than just rent

For hospitality and leisure businesses, the terms of your lease can make or break your operation. Whether you're negotiating a new lease, renewing an existing one, or taking over a lease through an acquisition, having the right advisor on your side is essential. They’ll help you secure terms that strengthen your business—not bind it.

Time and time again, we see businesses in the sector that would have got much better outcomes if they’d only taken expert guidance at the start of a process.

Trends in the hospitality and leisure sector

The headwinds in the sector are continuing and we're seeing smaller operators adapting to survive while smaller, wet led pubs are finding it tough. There’s lots of disposal activity happening, with some owners selling for retirement and others simply wanting to exit due to the well-documented challenges facing the sector.

However the hospitality and leisure sector remains buoyant and the demand for businesses continues despite the challenges around operating costs as we’ve witnessed advising on several high profile deals in the sector recently including the acquisitions of Colmans of Aysgarth, Yorebridge House, The Dubliner York, and Kensington House in Jesmond.

Destination venues continue to perform well together with the wedding sector and national operators remain active acquiring successful, independently owned businesses across the North East.

Specialist advice from Hay & Kilner’s Commercial Property Team

Hay & Kilner’s well-regarded and highly successful commercial property law solicitors have over 75 years of combined experience advising businesses in the hospitality and leisure sector across the North East.

They provide an end–to–end service, from finding an opportunity and acquiring it, building, fitting out and financing the project, right through to disposing of the property for investment purposes. The Hay & Kilner Commercial Property Team has built an impressive reputation for their sector expertise, commercial impact and unrivalled levels of client service.

Get in touch to find out how they can help you.