The Great Leisure Divide: Why Demand Is Rising but Profits Are Polarizing

Transaction Advisory

July 6, 2026

The Great Leisure Divide

Why experience continues to win, but profitability is becoming harder to achieve.

Overview

 

The UK leisure sector remains one of the most resilient areas of the economy. Consumers continue to prioritize spending on experiences, health and wellbeing, supporting demand across travel, fitness and leisure.

However, this resilience is not translating evenly into performance. A clear divide is emerging between operators that are capturing growth and those that are falling behind. Businesses with distinctive, experience-led or clearly positioned value offerings are maintaining demand, sustaining pricing and attracting investor interest. In contrast, undifferentiated and mid-market operators are facing increasing pressure from rising costs, cautious consumers and increasing competition.

This shift is structural not temporary. Changes in consumer behavior, operating costs and capital allocation are reshaping how value is created. Growth alone is no longer enough. The key is converting demand into consistent, profitable revenue.

The following themes show how this divide is playing out across the UK leisure market in 2026.

The Experience Economy Continues to Outperform

 

UK consumers continue to prioritize experiences over physical goods, with 88% willing to redirect discretionary spend towards lived experiences in 20261. Leisure demand remains resilient, while retail spending is constrained by the higher interest rates and the lingering effects of inflation.

This shift is proving structural rather than cyclical, reflecting a sustained preference for social, experimental and wellbeing-oriented consumption over ownership. Spending on travel, fitness, entertainment and social experiences continues to outperform many traditional consumer categories.

Leisure has emerged as the fastest-growing consumer subsector. Leisure assets generated a two-year revenue CAGR of 14.2%, compared with 8.8% across the wider consumer sector, while also delivering the highest EBITDA margins2,3.

This outperformance reflects not just demand strength, but the ability of leading operators to monetize experience through pricing power, repeat visitation and ancillary revenue streams.

 

In our recent work with mid-market leisure operators, we see a clear split: operators with distinctive, experience-led propositions continue to outperform, while those offering more generic formats struggle to maintain engagement and pricing.

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Wellness is Expanding Beyond Traditional Fitness

 

The fitness market is evolving into a broader wellness ecosystem encompassing strength training, longevity, recovery, mental wellbeing and lifestyle services.

This expansion is changing how consumers engage with the category. Fitness is no longer a standalone activity, but part of a wider lifestyle, a social activity and a recurring lifestyle expenditure. Among Millennials and Gen Z consumers in particular, wellness has shifted from an occasional purchase to a daily habit.

This evolution continues to support growth across the sector. The UK wellness market generated £5.7 billion of revenue in 2025 and continues to expand, supported by subscription models and integrated service offerings. However, growth is not uniform. The market is becoming more competitive, with operators needing to differentiate beyond equipment or location, through brand, community and breadth of offering4.

 

We have seen that the expansion of wellness offerings has enhanced customer lifetime value for successful operators, but it has also raised the bar for execution. Platforms that can cross-sell services and retain customers are strengthening their economics, while single-offer operators face increasing pressure on acquisition costs and churn.

Premium and Value Are Winning, the Middle is Under Pressure

 

The leisure market increasingly resembles a barbell, with premium and value operators capturing growth while undifferentiated mid-market businesses face mounting pressure5.

Consumers remain highly value conscious. However, behaviour at either end of the market is diverging. Value focused consumers prioritize affordability and flexibility, while higher-spending consumers continue to pay for differentiated, higher quality experiences. As a result, operators positioned clearly at either end of the market are outperforming6.

For mid-market operators, the challenge is structural rather than temporary. Rising costs limit pricing flexibility, while a lack of clear differentiation weakens customer loyalty. This leaves many operators exposed to both margin compression and higher churn7.

Affordability remains one of the leading drivers of customer churn, making mid-price, mid-experience offerings particularly vulnerable.

 

We are seeing a widening performance gap across the sector. Operators with a clear value proposition, whether premium or budget, are maintaining utilization and pricing, while those in the middle are being forced to reposition, invest or accept declining performance.

Investors Are Concentrating Around Scale and Quality

 

Private equity remains active in leisure. However, capital is becoming more concentrated, with investors prioritizing larger, higher-quality platforms with clear routes to scale.8,9

Leisure assets generate attractive margins, averaging 12%, and benefit from favorable long-term demand trends. At the same time, consumer holding periods have reached an all-time high of nearly seven years, reflecting slower exit activity and increased pressure on sponsors to create value operationally.10

This is reinforcing the divide across the sector. Scaled, differentiated platforms are attracting capital and premium valuations, while smaller or less differentiated businesses face more limited funding options and longer paths to exit.11

Investors are placing greater emphasis on:12

  • Scalability and multi-site expansion potential;
  • Recurring revenues and membership models;
  • Operational improvement opportunities; and
  • Clear competitive positioning.  
 

From our recent work on transactions in the sector, capital remains available but is being deployed more selectively. Investors are taking longer to make investment and divestment decisions. As a result, scale, resilience and quality of execution are becoming more important drivers of valuation than growth alone.

Implications for Operators and Investors

 

The divide across the leisure sector is likely to widen further.

  • Operators need to choose a clear position. Competing in the middle without differentiation is becoming increasingly difficult.
  • Experience and engagement are key drivers of value. Businesses that can build loyalty and repeat usage are better positioned to sustain pricing.
  • Scale is becoming more important. It supports marketing efficiency, brand strength and operational leverage.
  • Investors will continue to back fewer, higher-quality platforms. This will increase pressure on smaller and subscale operators to consolidate or reposition.

In this environment, demand alone is no longer a reliable indicator of success. The key question is not whether consumers are spending, but which operators are best positioned to convert that demand into sustainable, profitable growth.

Sources:
1 https://www.independent.co.uk/bulletin/news/spending-habits-brits-live-experiences-b2971924.html
2 https://www.savills.co.uk/research_articles/229130/382466-0
3 https://www.gain.ai/insight-reports/the-consumer-private-equity-report
4 https://kbfinsight.com/wp-content/uploads/2025/11/KBF-Insight-Ltd-Industry-Report-2026.pdf
5 https://kbfinsight.com/wp-content/uploads/2025/11/KBF-Insight-Ltd-Industry-Report-2026.pdf
6 https://kbfinsight.com/wp-content/uploads/2025/11/KBF-Insight-Ltd-Industry-Report-2026.pdf
7 https://www.savills.co.uk/research_articles/229130/382466-0
8 https://www.christie.com/news-resources/business-outlook-2026/leisure/
9 https://www.pwc.com/us/en/industries/consumer-markets/library/hospitality-and-leisure-deals-outlook.html
10 https://www.gain.ai/insight-reports/the-consumer-private-equity-report
11 https://www.mckinsey.com/industries/private-capital/our-insights
12 https://www.gain.ai/insight-reports/the-consumer-private-equity-report

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