Hotel Sector ‘Bounced Back Following Challenging Start to 2025’

Why It Matters

The rebound restores investor confidence and supports profitability amid rising operating expenses, signaling a resilient UK hospitality market. Continued top‑line growth will be crucial to offset pressure from higher business rates and staffing costs.

Key Takeaways

• H2 2025 RevPAR matches 2024 levels.
• London luxury and select‑service hotels up ~2% TRevPAR.
• Regional occupancy hits 79% with 2.2% ADR rise.
• 2026 RevPAR forecast 1.8‑1.9% growth UK‑wide.
• £100m hotel assets pipeline launching next two months.

Pulse Analysis

The second‑half surge in 2025 reflects a broader recovery in discretionary travel as consumer confidence rebounded after a year of inflation‑driven cost pressures. While operating expenses and business rates climbed, hotels leveraged stronger seasonal demand and a shift toward leisure and wellness stays to stabilize RevPAR. This dynamic mirrors a post‑pandemic pattern where guests prioritize experience over price, allowing operators to offset soft ADRs with higher occupancy and ancillary revenue streams.

London’s luxury and select‑service segments led the uplift, each posting roughly a 2% increase in total revenue per available room, underscoring the value of a balanced portfolio that blends high‑margin luxury with cost‑efficient select service. Regional markets, traditionally more price‑sensitive, outperformed by raising occupancy to 79% and nudging ADR up 2.2%, delivering a 3.8% RevPAR gain. Recent high‑profile transactions—PPHE’s £147.9 m repurchase of Park Plaza London Waterloo and Evolution Investment Fund’s £1.1 bn Mayfair acquisitions—signal confidence among investors seeking assets with diversified revenue mixes.

Looking ahead to 2026, Knight Frank forecasts modest RevPAR growth of 1.8‑1.9% across the UK, but margin protection will be paramount as business rates and staffing costs intensify. Operators are expected to focus on revenue‑enhancing initiatives such as dynamic pricing, expanded wellness offerings, and technology‑driven cost controls. The announced £100 million pipeline of new hotel assets slated for launch within two months adds depth to the market, providing fresh opportunities for capital deployment while testing the sector’s ability to sustain growth in a tightening economic environment.