The UK hotel market is at a pivotal juncture in 2025, with institutional investors facing a landscape marked by renewed supply growth, evolving demand patterns, and macroeconomic uncertainties. Recent data from CoStar and industry sources highlight both opportunities and risks as the sector adapts to post-pandemic realities and global economic shifts.

Rural strength, urban weakness

Performance data from the first eight months of 2025 underscore a divergence between London and the regional UK hotels. Throughout the first half of the year, domestic-led holiday destinations such as Lincolnshire and Cumbria emerged as top performers, with RevPAR (revenue per available room) up around 6 percent year-over-year at the halfway point. These gains are attributed to strong demand, stable supply, favourable weather and greater affordability encouraging Britons to travel at home. London, by contrast, has endured greater challenges given softer international tourism