Wellness a key driver of strong UK hotel performance, report shows

Hotel leisure clubs and wellness-led amenities contributed to strong UK hotel performance throughout 2025, according to a recent report.

Knight Frank’s latest UK Hotel Trading Performance Review revealed leisure revenues rose by an average of 6% per occupied room across all UK hotels over the past year, as guests gravitated towards hotel leisure clubs or spas.

General trading in the second half of 2025 was particularly robust, underpinned by high occupancy, rate growth and sustained leisure demand, excluding F&B.

London achieved average occupancy of 82.5%, up 1.2% year-on-year, while also reporting sustained occupancy growth between March and November.

Although average daily rate (ADR) for London hotels declined 2.5% year-on-year over the first six months of 2025, the second half of the year saw 2% growth in this category, resulting in full-year ADR broadly in line with 2024.

London’s select service and luxury hotels delivered the strongest performances during 2025.

Regional UK suffered from a 0.4% decline in revenue per available room (revpar) in H1, offset by strong trading in H1, with occupancy increasing by 1.2%, ADR by 2.2% and revpar by 3.8% year-on-year. This meant the segment closed 2025 with a 1.9% uplift in revpar to £79.

All hotels have been hit with higher employment costs, with payroll accounting for 75% of the total increase in operating costs in 2025. Data has shown payroll costs are roughly 30% higher per available room than in 2019.

This is expected to rise further with the phased introduction of the Employment Rights Bill and renewed cost pressures kicking in from April.

Despite this, Knight Frank has forecasted “modest but stable” revpar growth of 1.9% in London and 1.8% in regional UK markets in 2026.

Philippa Goldstein, senior surveyor and head of hotel research at Knight Frank, said: “Most segments ended 2025 at or near the profitability levels achieved the previous year, with the strongest results delivered by hotels with a well-balanced segmentation mix – particularly those with strong leisure and wellness offerings.

“Looking ahead, the primary challenge will be protecting net operating profit, as rising business rates and staffing costs are expected to put renewed pressure on margins in 2026. Strengthening top-line performance will therefore be even more critical amid an increasingly challenging environment for maintaining current profit levels.”

Henry Jackson, partner and head of hotel agency at Knight Frank, added: “2026 has started with real momentum, with several transactions already completed by our team and investor engagement building steadily. Encouragingly, we have a strong pipeline, with approximately £100m of assets confirmed to launch within the next two months, providing further depth to the market.

“Single-asset opportunities are expected to remain the dominant driver of activity, attracting a broad and competitive mix of domestic and overseas capital. Demand is deeper than many might anticipate, and with improving sentiment and sustained appetite for well-positioned assets, we are confident that 2026 will be a positive and active year for the UK hotel investment market.”