Domestic Travel Supports UK Hotels Despite Uneven Demand and Cautious Lending

Market Outlook

The UK hotel market is entering a period of stabilization in 2026 after absorbing new supply and facing increased competition, according to Christie & Co’s UK Hotel Market Review 2026.

Demand remains supportive, but travelers are becoming more selective. Leisure-led travel continues to influence hotel performance, though growth in average daily room rates, or ADR, is easing.

Overseas visitation remains uneven, while domestic travel behavior is shifting with changing demographics and consumer preferences. Hotel operators face uneven demand growth alongside higher operating costs.

Investment in hotel assets and technology is becoming increasingly important for businesses seeking to maintain visibility, manage distribution channels and protect market share.

Domestic and Inbound Demand

Domestic tourism remains a central source of demand for the hotel market. However, domestic trips are increasingly shorter, more flexible and value-led, increasing competition for existing travelers rather than driving broader growth.

Short-stay and event-led travel is supporting hotel performance, particularly in urban areas with strong event calendars and diversified demand drivers.

Inbound tourism is recovering, although the pace differs between markets. Long-haul travel is performing more strongly than travel from European markets. International visitor numbers remain sensitive to geopolitical developments, policy changes and cost pressures.

These trends are producing differing outcomes across regions and hotel types.

Costs and Hotel Operations

Hotel operators continue to face pressure from elevated interest rates, labor and National Insurance costs, utilities costs and business rates reform. These factors are constraining the conversion of revenue into profit.

The sector’s focus is shifting from room revenue recovery toward cost control, margin management and operational efficiency. Hotels are also placing greater emphasis on total revenue and guest spending beyond room income.

Breakfast is one area that can support profitability and the guest experience, alongside other efforts to increase ancillary revenue and differentiate hotel offerings.

Investment and Transaction Activity

Transaction activity remains active, although buyers are becoming more selective. Private purchasers and owner-operators continue to account for a significant share of deals, particularly involving smaller hotels and regional assets.

Institutional investors are concentrating on higher-value properties, portfolios and structured transactions. London remains the main market for institutional hotel investment because of its concentration of institutional-grade assets.

Regional transactions are largely supported by domestic capital. Investor interest is also increasing in aparthotels, extended-stay accommodation and leisure-led assets, while operator-led platforms continue to expand.

Christie & Co was ranked the most active hotel agent in the UK and the Eurozone by transaction volume in the 2025 MSCI Real Assets Global Brokerage Rankings.

Lending Conditions and Sector Pressures

Lending conditions have steadied but remain cautious, with refinancing shaping deal structures.

Although insolvencies are declining, pressure remains on operators because of cost inflation and margin compression.

Domestic demand and the sector’s adaptability continue to support investor interest as more hotel assets come to market. However, outcomes are expected to vary by location, asset type and operator strategy.

Download Christie & Co’s UK Hotel Market Review 2026