Knight Frank's latest UK hotel trading performance review and outlook forecasts RevPAR growth of 1.9 per cent in London and 1.8 per cent in regional UK markets through 2026 — described by the firm as "modest but stable." The narrow ten-basis-point spread between the capital and the regions marks the closest the two markets have sat on this metric at any point in the post-pandemic cycle, and reflects a meaningful rebalancing of the recovery story.
The 2025 base that produced the convergence
Regional UK closed 2025 with full-year RevPAR up 1.9 per cent to £79, helped by a strong second half in which occupancy rose 1.2 percentage points to 79 per cent and ADR climbed 2.2 per cent. The H2 momentum is what has carried into the 2026 forecast. London's 2025 was choppier on the top line: average annual occupancy reached 82.5 per cent (up 1.2 per cent year-on-year), but ADR declined 2.5 per cent year-on-year across the first half before recovering with 2 per cent growth in the second half. The full-year RevPAR picture in London was less impressive than the headline occupancy figures might suggest, and that softer base is part of why Knight Frank's 2026 call is so modest in absolute terms.
The narrowing of the London-regions spread is not so much about the regions outperforming as about the regions catching up after lagging through most of 2022, 2023 and 2024. The structural factors that supported London's earlier-cycle recovery — concentrated international demand, the more rapid return of business travel, the higher-rate inventory mix — have moderated as a competitive advantage. At the same time, domestic leisure demand has continued to firm, sterling has stayed accommodative for inbound leisure, and several regional markets have seen meaningful new supply lift their visibility to both leisure and corporate buyers.
Wellness as the marginal driver
The most consistent theme across the recent analyst output — Knight Frank, PwC and the Caterer's recent reporting on the sector all flag it — is the role of wellness as a pricing lever rather than a brand add-on. Hotels with credible wellness propositions are now extracting meaningful ADR premiums over comparable inventory in the same market without a corresponding wellness offer. The pricing power is most visible at the resort and country-house end of the market, but it is increasingly evident in metro four- and five-star inventory where spa, fitness and lifestyle programming have been treated as a core part of the proposition rather than an ancillary revenue stream.
The shift matters strategically because wellness investment is not symmetric across the existing inventory base. Properties that built spa and wellness facilities in the 2010s now hold a competitive advantage that newer-build hotels are spending significant capital to match. Several of the recently announced UK hotel refurbishment programmes — Gleneagles' lodge and spa expansion, Chewton Glen's kitchen garden and grounds investment, the Balmoral Edinburgh's wider refurbishment — have wellness or wellness-adjacent investment as a core component, which suggests the established operators have read the same data the analysts are publishing and are pricing in continued ADR growth from this lever.
The cost-side drag on the forecast
The same operating-cost headwinds biting the rest of UK hospitality apply to the hotel sector, and in some respects bite harder. Hotels with rateable values above £500,000 were excluded from the new lower hospitality multipliers introduced in April, which means most of the four-star-and-above inventory across the country is paying the full unmodified rates burden through 2026-27. The carry-through of the autumn 2025 Budget on National Insurance, the April 2025 National Living Wage uplift, and new compliance overheads on energy, allergens and packaging are all flowing through the operating P&L at the same time.
The implication is that even where top-line RevPAR growth meets or beats Knight Frank's forecast, EBITDA margin flow-through will be the watch item for 2026. Several analysts have flagged that flat or modestly down hotel EBITDA in a year of positive RevPAR growth is now a realistic base case for properties that have not been actively managing the operating cost line through energy procurement, labour scheduling technology adoption, and disciplined ancillary revenue capture.
What investors and operators should be watching
Three specific signals will shape how this forecast lands. First, the mid-year STR data due in July will be the first proper test of whether the 1.9 per cent and 1.8 per cent pencils are tracking — early Q2 trading reads from the listed hotel groups will give a directional steer before then. Second, the regional yield picture: if RevPAR growth converges and operating costs stabilise across the year, the spread to London on cap rates becomes increasingly hard for transaction advisors to defend, which has implications for the regional M&A pipeline. Third, the inbound leisure demand mix through the summer trading period — particularly whether the firming seen in 2025 carries into the high-season months — will determine how much of the 2026 forecast rests on visitor numbers rather than rate growth at properties that already have pricing power.