The outlook for demand in the UK hotel market suggests a positive, but low growth scenario in 2025. This is being driven by normalisation of economic conditions,
and a return to pre-pandemic levels of leisure tourism after the covid boom.
On one hand, the below average UK GDP growth of 1.6% in 2025, coupled with declines in consumer and business confidence, could have a dampening effect on UK domestic business and leisure demand.
However, if UK interest rates fall as predicted, and the pound weakens, inbound tourism
could be buoyed by the relative affordability of the UK for international travellers.
There are obvious timing risks to this growth scenario, and overall demand may still be affected by global economic uncertainty and the potential for increased tensions.
However, if we discount these downside risks, we anticipate a return in inbound travel
to 99% of pre-covid levels, driven by growth from the U.S., Europe, and Asia.
London revenue per available room (RevPAR) in 2025 is forecast to increase by 3% to £161.10, driven by an occupancy increase of 3.8% to 83.2% representing a return close to pre-covid levels. Average daily rate (ADR) however, is forecast to decline marginally
due to low inflation and leisure and corporate traveller price sensitivity in a competitive market.
In the regions, where GDP is a stronger driver of UK domestic corporate and leisure demand, RevPAR is forecast to increase in 2025 by 1.9% to £71.30, driven
by an increase of 2.3% in occupancy to 77.9% with ADR forecast to remain close to 2024 levels.
While further recovery in corporate travel demand is expected, volumes in 2025 are
likely to remain lower than pre-covid levels due to the rise of remote work and virtual
meetings. Hybrid meetings, with a blend of in-person and virtual attendance, are now
a well-established trend and likely to strengthen in 2025.
Hotels with good facilities for events and conferences may experience a benefit from an increase in demand for Meetings, Incentives, Conferences, and Exhibitions (MICE), as in-person events regain popularity, although short lead in times, particularly for smaller events which are a feature of the market post-covid.
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