The latest drinking and gaming trends in NSW pubs

Subdued discretionary spending, gaming regulation, declining alcohol consumption, and economic uncertainty are among the key concerns currently facing pubs and bars according to new insights from M3 Property.

Despite this subdued spending (the result of weak real income growth, a softening job market, and the expected rise of unemployment), pub, bar, and nightclub revenues are expected to grow in the next five years.

“The sector is positioned to benefit from the recovery in tourism, lower interest rates, and a strategic shift toward premium experiences and diversified offerings,” said M3 Property National Director of Specialised Assets James Ruben.

The forecast comes from M3’s October 2025 Australian Pubs, Bars, and Nightclub insights research report.

Food and drinks

The report notes that the pub industry is undergoing significant change as the result of evolving consumer preferences. Australians are demanding more premium food, craft beverages, and experiential dining, leading to a rise in gastropubs (e.g. Glebe pub the Nag’s Head Hotel with Chef Nelly Robinson; and The Dry Dock Balmain).

The NSW Government’s Liquor and Gaming regulator has forecast a 0.4 per cent decline in national per capital alcohol consumption in 2025-26, in line with the declining liquor consumption habits of the last decade.

Gaming

Meanwhile, some publicans are distancing themselves from reliance on gaming as the industry faces tighter regulatory scrutiny. The NSW Government expects to see a 1.4 per cent decline in gaming in 2025-26. JDA Hotel’s 2024 purchase of art deco Paddington pub The Unicorn, for example, was an opportunity for the Feros family to diversify its current portfolio away from poker machine-supported pubs.

As new regulations are discussed around gambling in New South Wales (the state that boasts some of the highest poker machines-per-capita in the world), Dean Feros saw the pub as a safe option, he told Hospitality last year. “Also, you’re paying a bit less to acquire a pub that doesn’t have poker machines, so it evens itself out,” he added.

M3 says that despite the cap on machines, “record demand is driving reactivation of dormant entitlements, as venues seek to maximise gaming revenue ahead of further reforms”.

Investment

The report recorded 20 venue transactions so far this year in NSW totalling $552.1 million, signalling renewed momentum in the sector. With three months still left in the year, 2025 has already surpassed 2024 – which concluded with $508.4 million in transactions. Private investors have dominated the market, making up 100 per cent of the transactions.

Significant deals include Redcape’s sale of El Cortez Hotel ($100 million) and Cabramatta Hotel ($90 million) to Sam Arnaout’s Iris Capital.

Hotels across the nation are also undergoing significant renewal projects, such as The Grand View Hotel in Cleveland, which recently unveiled a $6 million transformation; Brisbane’s Bracken Ridge Tavern, with the first stage of its $10 million renovation set to open in November; Melbourne’s Torrens Arms recent $2 million upgrade; and the $20 million update to Sydney’s St Marys Diggers Club.

Outlook

M3 says revenue in pubs and bars is expected to grow at 1.9 per cent annually over the next five years.

“Over the next five years, industry revenue is expected to grow despite being faced with key challenges, including increased regulation, declining beer consumption, and economic uncertainty. However, the sector is positioned to benefit from the recovery in tourism, lower interest rates, and a strategic shift toward premium experiences and diversified offerings,” said Ruben.

“Moving forward, operators who innovate and adapt to changing consumer preferences by expanding their drink selections are likely to maintain their competitiveness.”

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