What 2026 Holds for UK Hospitality and Leisure Businesses

20 January 2026

As the UK hospitality and leisure sector moves into 2026, a cautious optimism is emerging. Despite ongoing cost pressures and global economic uncertainty, recent forecasts suggest the market is stabilising offering opportunities for well-positioned operators who embrace flexibility, innovation and resilience.

Getting your Trinity Audio player ready...

As the UK hospitality and leisure sector steps into 2026, the landscape is marked by both challenges and opportunities. With domestic tourism providing a stable demand base and experiential offerings unlocking premium pricing, operators have the chance to redefine success.

Coupled with a favourable insurance market, now is the time for hospitality and leisure businesses to plan strategically, manage risks effectively, and position for long-term resilience in an ever-changing environment.

2025 in review: Lessons learned

Several themes stood out over the past 12 months across the UK hospitality and leisure market:

Resilience amid volatility: Despite macroeconomic headwinds, many hotels and leisure venues managed to hold occupancy and rates broadly stable, supported by a rebound in domestic leisure travel and international demand
Cost and margin pressures persist: Operating expenses, including energy, labour, maintenance and supply-chain costs continued to bite. For many operators, controlling costs while maintaining service standards became a central focus.
Supply constraints benefit well positioned properties: New hotel room supply remained limited across much of the UK, creating conditions where operators with well-located, well-managed assets retained pricing power and occupancy advantages.
Digital, sustainability and wellness pressures mounted: Growing guest expectations around seamless digital experiences, sustainable operations and wellbeing-focused amenities began to fundamentally reshape what a "competitive" hospitality offering looks like.
Risk management and operational flexibility became business critical: In a market where margins were squeezed and demand remained unpredictable, operators increasingly needed to think like risk managers: investing in energy efficiency, maintenance, flexible staffing and diversified revenue streams.

Collectively, 2025 reinformed a core truth: stable demand alone is not enough. Businesses that thrived were those combining operational discipline with adaptive offerings and a clear-eyed view of risk.

What we expect to influence 2026: Key trends

Looking ahead to 2026, the hospitality and leisure market is set for another year of change. Cost-of-living pressures will still play a part in shaping consumer behaviour, but the appetite for experiences remains strong. Operators who focus on value, sustainability, and using technology to create a more seamless and personalised customer journey will continue to stand out. Workforce challenges aren't going away, so flexible models and smart use of technology will be key to staying competitive.

On the insurance side, the market is still soft, which is good news for operators looking to secure competitive terms and broad cover. It's a great time to review programmes and lock in favourable conditions, but we can't assume this will last forever. Claims inflation and regulatory pressures could start to push rates up later in the year or into 2027. Those who can demonstrate strong risk management and resilience will be in the best position to maintain those advantages.

Overall, 2026 offers plenty of opportunity for businesses that innovate, keep the customer experience front and centre, and make the most of the current insurance market while planning ahead for what's next

Experience-led stays become the norm raising risk and insurance exposures

Guests are increasingly seeking curated, personalised and well-being-focused experiences. Whilst positive for revenue, this shift introduces new exposures:

More complex facilities, for example, wellness amenities and specialist equipment increase property and public liability risk
Bespoke programming and events create additional liability and cancellation exposures

Insurers will expect operators to demonstrate strong operational controls, staff training and maintenance records to support these enhanced offerings.

Tech and hybrid models become baseline, not differentiator

Features that once felt cutting-edge such as contactless check-in, smart room control and mobile-first payments will become standard expectations.

Mobile-first bookings, smart room systems, AI-based maintenance and fully digital guest journeys continue to grow. With this shift comes an evolving insurance story; a greater reliance on digital systems increases the likelihood of cyber-attacks, ransomware incidents and data breaches. In addition, the use of automated platforms introduce potential for business interruption if systems fail or are compromised.

Hybrid or mixed-use spaces such as co-working, events and extended stay create new liability and risk profiles, requiring specialist and tailored underwriting consideration.

As a result, insurers are scrutinising cyber resilience more closely, including data governance, cyber training, multi-factor authentication, incident response planning and system redundancy. Operators with strong cyber hygiene may be able to secure more favourable terms and access broader cover.

Sustainability and efficiency convergence raise ESG expectations from insurers

Environmental responsibility is no longer optional with insurers increasingly assessing energy efficiency systems, carbon reduction plans, water and waste management and physical climate resilience measures such as flood mitigation. Operators that are investing in sustainability may see improved risk profiles that support their premiums, whilst those failing to adjust may face increased scrutiny or exclusions.

Selective resilience across markets affects premium, valuation and coverage expectations

Industry forecasts show modest national growth but wide divergence between asset types and regions. For insurance programmes, this means:

Insurers will continue to examine property valuations, ensuring declared rebuild costs reflect inflation and construction volatility
Underperforming or under-invested assets may face restricted cover or higher deductibles, especially where maintenance backlogs exist
Strong, stable assets with clear risk controls may benefit from more favourable underwriting positions

UK budget considerations for the hospitality and leisure sector

Recent UK budget announcements reinforce the financial and operational pressures already facing hospitality and leisure businesses as they look ahead in 2026. While fiscal policy continues to evolve, the Budget reinforces a backdrop of rising employment costs, ongoing inflationary pressure and increased scrutiny on business resilience, all of which have implications for planning across the sector.

Changes to employer costs including ongoing wage pressures and adjustments linked to employment taxation are expected to have an impact on hospitality and leisure given the sectors nature. At the same time, limited progress on business rates reform and continued inflationary pressures around utilities and supply chains mean many operators may need to absorb higher fixed costs into their operating models.

As a result, the Budget reinforces a broader trend for 2026: hospitality and leisure operators will need to take a more strategic, long-term view of investment, risk management and insurance by balancing immediate affordability with future resilience.

Challenges ahead in 2026

Cost pressure continues influencing insurance affordability

Rising wage, utility and maintenance costs will force operators to reassess budgets. Insurance premiums may remain sensitive to property valuations, business interruption exposure, claims history and maintenance standards. A lack of risk investment or deferred maintenance may increase premiums or limit insurer appetite.

Impacts of increased legislation and regulation

The Employment Rights Bill 2025
National living wage / Employers NI
Martyn's Law (Terrorism)
Allergen regulations — Natasha's Law, Owen's Law (proposed)
Tourist taxes
Business rate reforms

The additional associated risks and costs are significant and introduce greater complexity and bureaucracy into business operations. Our risk mentor approach will help our clients navigate their way through some of these challenges so that they can focus on growth, innovation and achieving their business objectives.

Martyn's Law and rising security responsibilities

One of the most significant regulatory developments facing the hospitality and leisure sector is the introduction of Martyn's Law, which is expected to come into force during 2026.

The legislation will place a new statutory duty on operators of publicly accessible venues -including hotels, bars, restaurants, entertainment venues and leisure attractions — to take proportionate steps to mitigate the risk of terrorist attacks. Depending on venue size and capacity, requirements may include risk assessments, staff training, emergency planning, and in some cases, physical security measures.

This represents both an operational and insurance challenge to the sector. Implementing security protocols will require time, training and investment, and failure to demonstrate appropriate preparedness could lead to coverage limitations or increased premiums.

Growing digital dependence increases cyber and operational risk

Technology introduces efficiency but also vulnerability. For insurers, the growing reliance on digital platforms means renewed focus on:

Cyber security frameworks
Incident response plans
Operational continuity for digital failures
Data management and GDPR compliance

For businesses without a cyber strategy, they may face higher premiums or exclusions.

Rising guest expectations increase liability exposure

Experience-led stays, wellness offerings, interactive events and bespoke services heighten risk exposures across public liability, product liability and professional liability. Insurers will expect clear evidence of training, health and safety protocols, and supplier vetting.

ESG and compliance obligations create new risks if not managed

Failure to meet regulatory standards, whether around sustainability, allergens, health and safety, or fire compliance will materially impact insurability and brand reputations.

Extreme weather and climate risk impact property and business interruption cover

Flooding, storms and heat events continue to increase. Insurers may place heavier emphasis on:

Physical resilience
Flood mapping
Claims history
Preventative maintenance

Operators in high-risk areas will need proactive mitigation plans.

Growth opportunities for 2026

Despite the challenges, hospitality and leisure businesses have several clear avenues for growth in 2026, particularly those able to innovate, adapt and invest strategically.

Domestic tourism continues to underpin stable demand

Industry forecasts indicate that domestic tourism will continue to provide a stable and dependable demand base in 2026, particularly across regional and leisure-led markets¹. Whilst international travel costs still elevate and many consumers opting for convenience and value, staycations and short regional breaks remain highly attractive. PwC's UK Hotels Forecast highlights that constrained new supply and resilient leisure demands will continue to support occupancy and rate performance across both city and regional markets, being particularly evident in coastal destinations, countryside hotels, holiday parks and family leisure venues.

Experiential and lifestyle-led offerings unlock premium pricing

Guests increasingly want experiences, not just services. Immersive dining concepts, wellness experience, multi-sensory stays and personalised itineraries have been identified as major growth areas for 2026. This move towards experiential hospitality enables operators to diversify beyond core room or entry revenue and command premium pricing.

Technology-driven efficiency

Across the sector, smart technology adoption is identified as one of the most powerful enablers of growth. Digital tools such as AI-driven pricing engines, predictive maintenance systems and energy optimisation technologies can materially improve profitability while reducing operational risk. Automation and data analytics can enhance labour efficiency, strengthening margins without comprising service quality.

How Gallagher can help

Our hospitality and leisure practice supports operators across the UK in navigating risk, strengthening resilience and planning for long-term performance. We can help businesses to strengthen their risk management frameworks, optimise insurance programmes across property, liability, cyber, motor and business interruptions and benchmark risk and performance across the sector.

As the hospitality and leisure industry continues to evolve with rising guest expectations, increasing digital reliance, new sustainability pressures and more complex risk profiles, we evolve with it. Our specialist insight ensures that your insurance and risk strategies keep pace with emerging trends helping you stay resilient, competitive and prepared for the future.

If you're ready to protect your business and plan confidently for 2026 and beyond, speak to a member of our hospitality and leisure team today.

Sources

¹ "Selective resilience - Hotels Forecast 2025 – 2026," PwC, accessed 12^th January 2026.

Disclaimer

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.