Will investors have an appetite for hospitality in 2024? I think they will

I had the pleasure of interviewing Big Mamma co-founder and co-CEO Victor Lugger recently at MCA’s Restaurant Conference, where we discussed the company’s recent deal with McWin​​. Big Mamma exploded onto the London restaurant scene in 2019 with the opening of the eye-catchingly kitsch Gloria trattoria and has since opened a procession of equally arresting restaurants to great success, so it came as a surprise when he admitted that private equity interest in the company was lower than expected​.​ The always straight-talking Lugger said that in the 10 years of Big Mamma he had regular expressions of interest from private equity firms from across the globe but when the time finally came to talk turkey – or tagliatelle – the majority of potential suitors had averted their gazes.

Of course, it only takes one investor to make a deal and Big Mamma appears to have found one in McWin, which already has interests in hospitality with White Rabbit Projects, Gail’s, Popeyes, Vapiano and German brand L’Osteria to name a few. Discussing the deal, Lugger said of McWin: “They understand the importance of investing in people, food and brand over a very long period of time. They understand if you create value for guests now it will pay in five or 10 years.”

The tale of Big Mamma is one that will have struck a chord with a number of businesses in the hospitality sector in recent years. Since the outbreak of Coronavirus, which hit the sector exceptionally hard, there has been a reluctance by some private equity companies and banks to invest in hospitality. This has led businesses this year, most notably Honest Burgers and MJMK, to look instead to crowdfunding to raise finance. Speaking with me at another event, Harry Heartfield, senior partner at leisure investment group Edition Capital, described the current economic climate as a challenging time for investors with the legacy of Covid, inflationary pressures, and the long tail of Brexit all playing their part.

In general, the mood among restaurateurs seems to be that it will take a couple more years for private equity to view hospitality as favourably as it did pre Covid. However, recent events do seem encouraging. As well as the McWin purchase, another high-profile deal currently going through is that of Apollo’s purchase of The Restaurant Group​,​ with some investors even suggesting it might ferret out rival bids (this never came to fruition). Then there’s Calveton and Breal Capital’s £60m purchase of  D​&D London​ ​and Breal’s recent purchase of wine bar group Vinoteca​​ out of administration. And let’s not forget that earlier in the year Fulham Shore​ ​was acquired by Japanese conglomerate Toridoll for the princely sum of £93m.

Hospitality businesses have also successfully raised finance in recent months. Kricket has just announced it will open a fourth restaurant​​ having secured a new round of funding from White Rabbit Projects and JKS says it is turning it eyes stateside following the completion of its latest funding​​ round that reportedly saw it raise in the region of £10m. Last month, hot chocolate brand Knoops​​ announced it had achieved a ‘milestone’ £8.3m fundraise that will enable it to double the size of its estate in the next year.

The signs are there, then, that hospitality could once again be seen as the big ticket for investors. Heartfield also told me that his longer-term view of investment in the sector was ‘broadly positive’ and that cocktail bars, ‘independently-minded chains’ and those offering immersive experiences were businesses most attractive to investors.

As another year’s gap is put between the Covid lockdowns and the present there are signs that optimism is returning to investors in hospitality. And not before time.