According to reports, as hospitality businesses across the UK have reopened over the past few weeks, consumers have returned in droves. I think many UK shares will benefit as a result.
Estimates suggest consumers have saved up nearly £200bn throughout the pandemic. This implies there’s a significant amount of money out there ready to be spent with hospitality businesses across the country.
As such, I would buy a basket of these companies with an investment of £5,000 today. I think this approach would allow me to profit from any upside while minimising losses if one investment starts to struggle.
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Risks ahead
Before I highlight the five UK shares I would buy, I should note that investing in this sector is incredibly risky.
Hospitality companies have skinny margins, and there’s no guarantee every business will recover. The sector is also suffering from a staff shortage, which may hold back growth. Further challenges include business rates, high rents and paying back debts built up during the pandemic.
All of the companies outlined below are likely to face the same risks and challenges. No one business is immune. But I still like them.
UK shares to buy
The first hospitality business I would buy is not really a hospitality business. British Land is the company behind shopping centres such as Meadowhall and Drake Circus and offices such as Broadgate in the City.
The company acts as the landlord for many different businesses, including retail and hospitality. Unfortunately, as these firms have suffered in the pandemic, so has British Land. Rent collection from its hospitality and retail portfolio plunged last year.
Luckily, income from office properties offset some of the declines. As the hospitality business recovers, rent collection should improve, which should drive the group’s recovery. As an alternative way to invest in the recovery of the UK hospitality sector, I would buy this real estate investment trust for my portfolio of UK shares.
Moving on, I would also buy hotel operator Whitbread. This firm has suffered far more than British Land. Revenues almost totally evaporated last year as the company was forced to shut to tourists.
However, this year could be an exceptional one for the group. With overseas holidays still mainly banned, many UK consumers are planning to holiday in the UK. That could be great news for the company and its Premier Inn brand.
Eating and drinking
In its latest trading update, Fulham Shore, the owner of the Franco Manca and The Real Greek restaurants, noted that trading in the week ended Sunday 18 April 2021, was ahead of the same period in 2019. I think that’s incredibly encouraging and shows the company’s recovery potential.
Pub operators Marston’s and Young & Co’s have issued similar upbeat trading statements since the economy reopened several weeks ago. I think this trend will continue as pent-up consumer demand is unleashed over the next few months.
And with that being the case, I would buy all three of these companies for my portfolio of UK shares as economic recovery investments even though they are all incredibly exposed to another potential shutdown if yet another wave of coronavirus emerges.
