„Welcome to our Industry Insight, giving you a birds-eye view in the most recent developments concerning the Hospitality market. After the recession of the COVID-19 pandemic, the market is anticipated to recover well. The QSR market is expected to grow strongly in the years to come, fueled by the ongoing digitalization and developments in the delivery sector. Valuation multiples are currently witnessing a boom which underscores the stability and growth expectations for the QSR sector. This is triggered by the positive influence of COVID-19 on the delivery segment“
Emanuel Müller
Managing Partner
Market Insights
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Market Overview
Global Market Development per Segment
in USD b 2020-2025
Impact of COVID-19 on the Hospitality Sector
Europe, according to the EU-28 Services Turnover Index Q1 2020- Q1 2021
- Vending Machines make up the smallest portion of the Hospitality market and display the strongest growth in the APAC region for the years to come. During the COVID-19 pandemic, the industry suffered heavily because of the experienced restrictions. We assess that the impact of new work settings, home office, and travel restrictions will have a sustainable influence on this sector.
- Travel Platforms in the online sector nowadays make up around 23% of the Hospitality market in 2021. During the pandemic, the sector suffered strong declines of up to 80-90%.
- QSR (Quick Service Restaurants) account for the largest portion of the Hospitality market. Despite the harsh impact of the pandemic on the Hospitality industry, we have seen that QSR restaurants suffered the least because of technological innovations and, especially, developments in the delivery sector.
- Bakeries are seen to have their strongest growth in China with approximately 7% CAGR. In Europe, on the other hand, the growth is pictured between 1-3% CAGR, accompanied by the ongoing strong consolidation in the industry.
- Hotels and Accommodation witnessed one of the sharpest declines during the pandemic. Revenues per available room decreased by around 90% during Q2 2020. However, we estimate that, after the downturn, the industry will see a slow and gradual recovery, pushing hotels and accommodations to the largest sub-sector of the Hospitality Industry by 2025.
Sources: Globesnewswire (2021), expertmarketresearch (2021), Statista (2021), Prnewswire (2021), strategy (2021), eurostat (2021)
Market Details & Industry Segments – Food Delivery
Food Delivery Market
global in USD b 2020-2025
Market Shares in the Food Delivery platform market
large platforms in Europe in % 2020
- The food delivery market is expected to grow at a CAGR between 10-11% in the upcoming years. Initially, we expect a slower increase because of the reopening of restaurants after the pandemic. Nevertheless, in the long-term, we assess that the consumer preferences towards food delivery will continue to grow, as habits of consumption seem to have changed.
- Overall, we can witness that food delivery makes up approximately 13% of the QSR market in the year 2020, speeding up to approximately 20% of the global QSR market in 2025.
- The European food delivery market makes up approximately 10% of the global food delivery industry. There are a few large players in the market, such as Just Eat Takeaway, which after its merger in 2020 was able to rise to a 50% market share in Europe. However, competition is now rising up again. We predominantly observed this in Germany, where new players like DoorDash Uber Eats, Wolt, Bolt Food, and Foodpanda (Board of Delivery Hero) already launched their platform or are looking to enter the market. As by the case of Foodpanda it is especially interesting to see that Delivery Hero sold its German operations to Just Eat Takeaway.com in 2018 and now wants to start their own platform again.
Sources: prnewswire (2021), businessofapps (2021), CNBC (2020), faz (2021)
Observed Trends
The COVID-19 pandemic-related shutdowns drove the Hospitality industry to a halt in 2020, causing the out-of-home consumption in Western Europe to drop approximately -38% when compared to FY19. At the same time, the pandemic caused a customer preference towards food delivery services, which was also enhanced by governmental support through decreases in the VAT. This caused enterprises such as Delivery Hero to enter the DAX, among the 30 most valuable companies in Germany.
“Think global, act local” is the motto that defined the consumption patterns during the past years, putting an emphasis on regional food, health, and fitness among the consumers. Despite the trend, analysts point that the big winners of the crisis can be seen within the QSR sector, specifically among international Burger & Pizza chains with established delivery systems. For the future, we expect that bowl concepts are very likely to be the coming growth champions.
Digitalization and Big Data will continue to govern the Hospitality industry. Whilst having supported sub-sectors of the industry during the COVID-19 pandemic, digitalization also offers plenty of opportunities to grow the Hospitality market further and decrease the running costs of companies sustainably. This will further strengthen the players in the market who can afford big and dedicated IT teams, giving them a competitive advantage on the E-commerce offering and positioning.
With 2021 offering a promising outlook for operability in the Hospitality sector, the M&A activity is starting to increase again and the number of deals approximately matches pre-crisis statistics. In the QSR sub-sector we can witness a rally in acquisitions among private equity investors and large players in the market.
Sources: Foodservice (2020), McKinsey (2020), BCG (2020), JD Supra (2021), QSR magazine (2021)
Valuation Trends and Developments – QSR
EV/EBITDA(Next 12 Months)
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The peer group consisted of 18 stock-listed multinationals in the QSR sector. For Small and Mid-sized businesses 20-30% markdowns in multiples, depending on industry and company characteristics, may be expected.
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EV/SALES grew strongly in the analyzed two-year period and was barely impacted by the COVID-19 pandemic-related shutdowns. In Q1 2021 EV/SALES witnessed its 2-year peak at a multiple of 2.7x. For the next 12 months, we expect multiples above the median of 1.9x.
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EV/EBITDA strongly signals the initial impact of the pandemic in Q1 2020 with multiples dropping below 10.0x. After the first shock, we witnessed a fast recovery above pre-pandemic valuations, resulting in a current multiple of 16.5x.
Source: Sazun Equity Research, Hospitality-QSR (2021)
Key Performance Indicators
Selected Latest Deals with a focus on QSR
Want to know more?
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If you would like to learn more about the valuations and deals of your industry, the transaction mentioned above, or generally our way of working, we would certainly be happy to demonstrate our m&a PLUS® principle in a confidential meeting. Of course, we also offer detailed overviews of the vending machines business, bakeries, and travel platforms, where we have strong credentials.
Just get in touch and we will share our experience on how to grow businesses with long-lasting partnerships.
With passion for M&A,
Your SAZUN Team
