Knight Frank's UK Hotel Trading Performance Review has placed London RevPAR growth at 1.9 per cent for 2026 and regional UK growth at 1.8 per cent, with both markets expected to be driven primarily by average daily rate increases rather than material gains in occupancy, which has relatively little room to expand at current levels.
The 2025 Baseline
The forecasts follow a year in which the UK hotel sector staged a meaningful second-half recovery after a difficult start to 2025. London achieved full-year RevPAR growth of 1.5 per cent, largely offset by ADR weakness in H1 — a period affected by a sluggish corporate travel market and a later-than-expected return of group and conference business following the 2024 disruptions. London recorded 82.5 per cent occupancy for 2025 as a whole, up 1.2 percentage points year on year, while ADR recovered to broadly 2024 levels after declining 2.5 per cent in the first half.
Regional UK performed with greater consistency across the year, closing 2025 with RevPAR growth of 1.9 per cent to £79 — a figure Knight Frank describes as representing balanced contributions from both rate and occupancy. In H2 specifically, regional markets posted 3.8 per cent RevPAR growth as leisure travellers continued to prioritise domestic short-breaks over overseas trips in a cost-of-living environment that has proved stickier than many economists projected.
Leisure and Wellness as Structural Drivers
Knight Frank's analysis points to sustained growth in leisure demand and, in particular, a sharp increase in consumer appetite for wellness-oriented hospitality as a structural rather than cyclical trend. Hotels that have invested in spa and wellness infrastructure — including thermal facilities, fitness programming, and sleep-focused room design — have consistently outperformed the wider market on both occupancy and RevPAR metrics, a pattern that the firm expects to continue through 2026 and into 2027.
The wellness premium is most pronounced in rural and coastal resort properties, where guests are demonstrably prepared to pay an ADR uplift of 15 to 25 per cent over comparable non-wellness product. Urban wellness, by contrast, has produced more modest returns, partly because of higher build costs and the operational complexity of running wet-side facilities in dense city-centre hotels.
Supply Constraints and Investment Activity
One factor supporting rate growth in 2026 is the relatively constrained new supply pipeline. Construction cost inflation over 2022 and 2023, combined with tighter development finance conditions, has slowed the delivery of new hotel rooms in most UK markets. STR data tracking committed openings for 2026 and 2027 indicates that both London and regional UK will see below-average net room additions, providing structural support for existing operators' rate strategies.
Investment activity in UK hotel assets has been cautious but beginning to recover. Knight Frank's transactions data points to renewed interest from US-based private equity and real estate investment trusts in UK regional portfolio acquisitions, attracted by sterling pricing and yield profiles that compare favourably against Continental European equivalent assets in the current rate environment.
Forward Bookings and the May 2026 Picture
As of mid-April, forward-committed occupancy for May 2026 stood at approximately 28 per cent — a figure that reflects early-stage booking patterns rather than expected final occupancy, which typically matures to 75 per cent or above in active urban markets as departure dates approach. The summer pipeline is supported by strong inbound leisure demand, with VisitBritain tracking continued interest from North American and Gulf markets.
For operators, the 1.9 per cent RevPAR projection for London implies modest but genuine real-terms improvement assuming inflation continues to moderate toward the Bank of England's 2 per cent target. The greater risk sits on the cost side of the P&L: the same April 2026 wage increases and NIC uplift affecting pubs and restaurants apply with equal force to hotel front-of-house and housekeeping departments, where labour represents the dominant variable cost.