The UK hotel market in 2024 has experienced steady performance, with certain segments outperforming others. While some budget hotels have faced difficulties, luxury hotels, especially in Edinburgh, have continued to thrive.
As demand strengthens, there are still ongoing challenges related to operational costs and a cautious investment outlook.
Go deeper with GlobalData
Operational performance: growth slows but remains strong
In 2024, UK hotels have seen a more normalised top-line performance compared to the double-digit growth of 2023. According to STR CoStar data, as of August 2024, RevPAR (Revenue per Available Room) in London grew by 1.5%, while regional UK performance was up by 3.1%.
London experienced a temporary dip in March and April, partly due to the coronation, but the market bounced back quickly to meet long-term trends.
“Although budget hotels, particularly in London, faced challenges, luxury hotels have been performing robustly,” stated a leading industry analyst. Edinburgh has stood out with a 14.4% year-on-year RevPAR increase as of August, making it one of the top performers in Europe.
Market segments: divergence in performance
Budget hotels have had a tougher time in 2024, particularly in London, where the winding down of government-contracted asylum hotels has impacted occupancy rates. Asylum accommodation contracts, which fell by 30% in 2024, have affected hotels in more expensive areas like Greater London.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataA drop in demand, alongside high average daily rates (ADR), led some consumers to shift towards midscale or luxury hotels for better perceived value.
However, this trend is expected to be short-lived. “While the economy segment faces temporary contraction, it’s important to note that luxury hotels continue to grow, with London luxury ADRs 31% higher than five years ago,” remarked a hotel market expert.
Investment outlook: cautious optimism
Despite some operational challenges, investment activity in the UK hotel market is on the rise. As of Q3 2024, year-to-date transaction volumes reached £3.82 billion, an increase of 185% compared to 2023.
Portfolio acquisitions accounted for 62% of this volume, with a notable rise in single-asset deals, particularly in London.
However, despite growing investor interest, caution remains. Yield compression has been minimal, with many investors opting to wait for clearer signs of stability.
Investment activity is expected to ramp up in 2025, driven by better investor confidence and a growing gap between debt costs and yields. “We anticipate a faster pace of yield compression next year,” said a financial analyst closely monitoring the sector.
While the UK hotel market faces some short-term challenges, the outlook remains positive. With growing demand, particularly from leisure travellers and international tourists, and a gradual return of corporate event demand, the sector is poised for continued growth in the years ahead.
