In early 2025, the UK hotel industry hit a notable milestone. National occupancy rates rose to 80.5% in January, underscoring the post-pandemic bounce-back. London fared even better, reaching 85.1%—its best figure since 2019. The uplift stems largely from pre-Christmas city-breakers and busier airports, fuelling demand across towns and regions alike.
The momentum is being driven by a surge in short city breaks, staycations and a renewed confidence in corporate travel. According to the RSM Consumer Outlook, sentiment remained upbeat in the first quarter, though many households still kept a close eye on the purse strings.
Despite the extra heads on beds, room rates have also been edging up. Between November 2024 and January 2025 the average nightly rate increased 2.4%, from £148.46 to £152.12. Inflation and heftier running costs have pushed tariffs to almost double their pre-Covid level—a trend the Bank of England is monitoring closely for its wider economic knock-ons.
Key Takeaways
The UK hotel sector is bouncing back strongly, with high occupancy rates and rising room rates, despite facing economic headwinds and higher running costs.
- UK hotel occupancy rates have soared back to pre-pandemic levels, fuelled by a pick-up in domestic trips and corporate travel.
- Room rates, pushed up by inflation and steeper running costs, have all but doubled since before the pandemic, prompting worries about knock-on effects for the wider economy.
- The industry is grappling with mounting cost pressures, including a new levy on wages, making savvy cost-management and investment in tech all the more critical.
Operating costs and taxation pile on the pressure
Behind the headline performance, hotels are grappling with a rising cost base. The Autumn 2024 Budget introduced a 1.2% payroll levy on wage bills exceeding £5,000—a move hospitality bosses fear will crimp recruitment and, ultimately, drive prices higher for guests.
These tax headwinds come on top of volatile supply-chain costs and beefed-up wage packets, making forensic cost control imperative, with sector leaders urging operators to protect margins without denting the guest experience.
Chris Tate, Head of Hotels at RSM, underscored the need for savvy financial planning, noting that artificial intelligence and back-of-house tech can sharpen efficiency. He also highlighted the growing importance of data-led marketing and personalised guest engagement as customer expectations evolve.
In this tough cost climate, Warner Hotels is pressing ahead with the expansion of its premium short-break portfolio. With 16 properties—including new up-market boltholes such as The Runnymede on Thames and Heythrop Park—the group is doubling down on experience and brand distinction. CEO Paul Pomroy, who came aboard in March 2024, is steering the business through its growth phase with a focus on operational excellence and inclusivity.
Leadership, innovation and inclusion
The UK’s hospitality landscape is characterised by dynamic leadership and a restless appetite for innovation. Notable figures like chef Jason Atherton are scaling their restaurant empires, while stalwarts such as Jeremy King are launching fresh dining concepts, illustrating the sector’s ongoing evolution.
https://www.youtube.com/embed/Rumj0M01cOI
Investing in people and social responsibility is equally key. Landlord Stuart at The Cabbage Patch pub champions neuro-diverse recruitment, mirroring a wider move towards inclusive hiring and community engagement. Similarly, Janet, Aramark UK Managing Director, supports women in hospitality through mentoring and leadership schemes.
Technology is proving pivotal in tackling industry challenges. Firms like Sona deliver AI-driven workforce tools to fine-tune rotas, bolster retention and lift service standards, whilst QVO Hospitality leans on storytelling-led marketing to build guest loyalty and reinforce brand identity.
Experience-led attractions echo these themes. Chester Zoo’s Commercial Director, Dom, blends expertise across operations, fundraising and PR to keep footfall high—strategies that help hospitality venues diversify revenue and stand out in a crowded field.
Economically, Barclays UK Chief Economist Jack Meaning strikes a cautiously optimistic note. Demand is holding up, yet inflation and interest rates remain under the microscope given their potential impact on consumer behaviour and operating costs.
As the sector moves through 2025, agility, inclusive leadership and digital transformation look set to be the keys to capitalising on the recovery whilst navigating choppy economic waters.