a day ago
UK hotel profits fall despite strong investment activity
The UK hotel market entered 2025 on a cautious footing, with the latest Knight Frank Hotel Dashboard for Q1 indicating flat trading performance, rising payroll costs and squeezed profits across both London and regional UK.
Key performance indicators such as ADR and RevPAR have deteriorated, even as operational expenses continue to climb.
London hotels experienced a challenging start to the year, with average daily rate (ADR) and revenue per available room (RevPAR) both dropping.
ADR fell by around 1.3 percent compared with Q1‑24, while RevPAR mirrored that decline.
The most pronounced falls were seen in upper-midscale and select-service segments, with RevPAR down by between 4.6 percent and 7.7 percent during the first quarter.
Across London, payroll outlays per available room (PAR) surged by 4.6 percent year‑on‑year, largely fuelled by increased costs in managerial and non-operational roles.
Regional UK hotels reported a slightly sharper rise of 4.9 percent PAR.
Revenues remained largely static, pushing the share of payroll costs higher and contributing to margin pressure.
Profitability contracted across the sector.
London's gross operating profit per available room (GOPPAR) dropped by an average of 8 percent in Q1, while regional UK saw a 5.4 percent decline.
However, there were exceptions: golf and spa hotels in the regions continued to deliver solid GOPPAR growth, although the pace has moderated.
Despite operational headwinds, hotel investment activity stayed strong in Q1 2025.
Total transaction volumes reached approximately £800 million, spanning over 50 hotels and 4,600 rooms.
London accounted for 60 percent of investment by value, with luxury and upper-upscale properties representing 62 percent of the market
The report highlights the pressure faced by UK hoteliers from stagnating revenues and rising labour costs.
The slowdown in ADR and RevPAR, combined with increasing payroll outlays, signals the need for operational agility.
For investors, the resilient capital inflows into London's luxury and upper-upscale segments suggest confidence remains in long-term value, even as performance metrics stumble in the short term.
"UK hotel profits fall despite strong investment activity" was originally created and published by Hotel Management Network, a GlobalData owned brand.
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