UK staged second-half comeback in 2025

INTERNATIONAL REPORT — Despite early-year volatility, the U.K. hotel sector rebounded in the second half of 2025, reversing GOPPAR declines with improved ADR and softening inflation, according to a report by Knight Frank. As a result, full-year 2025 RevPAR matched or exceeded prior levels across London and regional markets.

Heading into 2026, rising business rates, labor costs and regulatory pressures threaten margins, tempering the pace of growth despite cautious optimism.

The report said the biggest challenge will be protecting the net operating profit, as the strong rise in business rates is expected to erode margins across all segments of the U.K. hotel market.

London hotels were resilient in 2025, with occupancy rising 1.2 points to 82.5%, offsetting a 2.5% ADR decline in the first half before a 2% second-half rebound left rates broadly flat year-on-year. RevPAR increased 1.5% for the year, including 4.4% growth in the second half.

Regional U.K. mirrored the two-speed recovery: after a 0.4% first-half RevPAR dip, second-half occupancy rose to 79% and ADR was up 2.2%, driving 3.8% RevPAR growth. Full-year regional RevPAR climbed 1.9% to £79. Ancillary revenues also increased, with F&B gains contributing to 2% TRevPAR growth.

U.K. hotels capitalized on wellness demand in 2025, driving 7.3% growth in leisure revenue and 39% gains since 2019, while car-parking revenues surged 32%, boosting ancillary performance. Hotels in the U.K. proved resilient in 2025. While London GOPPAR slipped 0.5% to £111.60, regional profits held at £37, though the GOP margin fell to 30.3%.

Regional upscale hotels led U.K. performance in 2025, delivering 3.4% GOPPAR growth and reversing a 4.8% first-half shortfall through overhead discipline despite payroll pressures. Golf and spa properties posted the strongest TRevPAR increase, up 4.2%, though 6.6% payroll inflation tempered profitability; second-half efficiencies drove 2.8% GOPPAR growth.

The biggest declines in GOPPAR were suffered by London’s luxury hotels and regional serviced apartments. London’s luxury hotels achieved TRevPAR growth of 2% YOY, but this cushion wasn’t enough to withstand rising costs, leading to a 4% decline in GOPPAR. Regional serviced apartments saw a 3.6% decline in RevPAR, driven by a sharp drop in GOPPAR.