The U.K. hotel sector delivered a resilient performance in 2025, marked by a strong second-half recovery after a challenging start, according to Knight Frank’s latest U.K. Hotel Trading Performance Review.
Rising operating costs and softer average daily rates weighed on the first half of the year, but performance strengthened in the second half, supported by high seasonal demand resulting in RevPAR finishing broadly in line with or ahead of 2024 across London and the provinces.
Knight Frank forecasts RevPAR growth of 1.9% in London and 1.8% in regional U.K. markets in 2026.
London recorded 82.5% occupancy up 1.2 percentage points year on year. ADR declined by 2.5% in H1 but grew 2% in H2 resulting in full year ADR broadly in line with 2024. Select service and luxury hotels led TRevPAR growth at 1.9% and 2.0% respectively.
“Despite a challenging operating environment, a strong rebound in the second half of the year helped to offset losses incurred in the first half,” said Philippa Goldstein, senior surveyor, head of hotel research at Knight Frank. Most segments ended 2025 at or near the profitability levels achieved the previous year with the strongest results delivered by hotels with a well-balanced segmentation mix—particularly those with strong leisure and wellness offerings.”
“2026 has started with real momentum with several transactions already completed by our team and investor engagement building steadily,” said Henry Jackson Partner, head of hotel Agency at Knight Frank. Encouragingly we have a strong pipeline with approximately £100 million of assets confirmed to launch within the next two months providing further depth to the market.”
Regional U.K. saw H1 RevPAR decline by 0.4% before rebounding in H2 with occupancy at 79% up 1.2 percentage points and ADR up 2.2% driving RevPAR growth of 3.8%. The year closed with RevPAR up 1.9% to £79.
Leisure revenues excluding F&B rose 6.0% per occupied room across hotels with leisure offerings. Payroll accounted for 75% of operating cost increases in 2025 with payroll costs about 30% higher per available room than in 2019.