The latest UK hotels forecast from PwC points to a sector moving beyond post-pandemic recovery and into a phase of consolidation, where performance is increasingly shaped by cost control, pricing discipline and operational efficiency rather than volume-led growth.

Demand steadies after post-pandemic rebound

The forecast indicates that hotel occupancy is expected to level off in 2026 following several years of recovery.

Domestic leisure travel continues to provide a stable base, while international arrivals are improving but remain sensitive to economic conditions and exchange rates in key source markets.

Business travel is projected to grow more slowly, reflecting ongoing caution in corporate spending and the lasting impact of hybrid working.

Recent data from the Office for National Statistics shows modest year-on-year growth in accommodation services through late 2025, reinforcing the view that demand is normalising.

As a result, revenue growth across the UK hotel sector is increasingly dependent on maintaining room rates rather than expanding occupancy.

Rising costs tighten profit margins

Cost inflation remains a defining issue for hotel operators in 2026. PwC highlights continued pressure from wages, energy and food costs, alongside higher financing expenses following recent interest rate rises.

Labour availability remains uneven across the country, particularly in regional and leisure destinations, adding to wage pressures.

While average daily rates remain historically high, the scope to pass further cost increases on to guests is narrowing as price sensitivity grows.

This is expected to weigh on profitability, especially for mid-scale and budget hotels operating with tighter margins and limited pricing flexibility.

Uneven performance across regions and segments

The outlook suggests widening differences in performance between regions and hotel types. London is forecast to remain the strongest market, supported by international tourism, major events and a gradual recovery in meetings and conferences.

Regional cities and leisure destinations are expected to see steadier but more variable results, linked closely to domestic travel trends and local economic conditions.

Larger and branded hotel groups are generally better positioned to absorb cost pressures through scale, procurement and revenue management.

Independent operators may face a more challenging environment, particularly where demand is seasonal or heavily reliant on discretionary spending.

Overall, the shift from recovery to consolidation signals a more mature phase for the UK hotel market.

For international industry readers, the 2026 outlook reflects broader trends across established hospitality markets, where resilience in demand is tempered by tighter margins and a growing focus on efficiency and disciplined growth.