The UK hotel market is set for a period of moderate growth, underpinned by resilient consumer demand, according to the latest market outlook from consultants PwC.
Their latest UK hotels forecast, looking through to 2026, reviews a year of two halves in 2025, but looks forward to a period of steady, if unexciting, market development. The consultants expect capital to be more readily available to support investment, but believe the supply of new hotels will remain relatively constrained. In a period of muted growth, operators will need to be flexible and adaptive to make the most of market opportunities.
Market picks up after a soft start to 2025
PwC says the first half of 2025 was softer than expected, notably in the London market, where revpar lagged the consultant’s own forecast. Inbound visitor numbers were below the volumes expected, reducing occupancy levels. But there are better prospects for the second half of 2025, “pointing towards a new phase of recovery”.
Looking ahead to 2026. revpar at London hotels is expected to improve by 1.8% to GBP158.80, largely driven by occupancy up 1.7% to an average 81.6%. Supply growth in the UK capital will constrain the ability of operators and hotel managers to increase their room rates, while there will be less major events in the London calendar to prompt compression night pricing.
In the regions, the PwC outlook is for revpar to grow by 1.5% in 2026, supported by a 1.2% rise in average occupancy to 76.6%. Here, room rates are expected to improve just 0.6% in nominal terms.
Around 6,300 new hotel rooms are expected to enter the London market in the period 2026 to 2028, increasing overall supply by around 4%. This will add to the 3,000 rooms launched into the market in 2025. These additions are serving different market segments unevenly: while around 750 of the 2025 rooms added were luxury hotels, 2026 will see more additions in luxury and upscale. Looking ahead, an increasing number of new openings will feed into the upper midscale and economy segments.
Outside the capital, the cities of Belfast, Edinburgh, Glasgow, Leeds and Manchester will all see above average supply growth, possibly limiting options to increase room rates. However, overall, the UK regions should see 2% supply growth through 2025 and 2026. Office conversions continue to play a major part in new hotel delivery, a trend PwC expects to see more of.
Hoteliers need to stay with the market
The consultants warn that those who fail to invest in their properties, risk falling behind the market. “A widening gap is emerging between newly repositioned or branded assets and older stock. Properties that fail to reinvest risk falling behind on both rate and occupancy performance.”
Investment activity in the UK hotel market is trending towards the long term average, after a spell when several major portfolios changed hands. Those developing new accommodation are looking at innovative options, including extended stay formats, and new concepts such as branded residences and higher density hotels with compact rooms. PwC also notes that investors are partnering to share risk, and manage the complexities of the hotel market.
