UK hotel market boosted by demand, investment, and innovation in 2025

London, Dublin and Istanbul are the only three cities in Europe which will see an increase of more than 3,000 rooms in 2025, according to recent figures from CoStar’s pipeline data. London itself is projected to open 5632 rooms in 2025. Notable developments include InterContinental Hotels Group's (IHG) new Holiday Inn locations, Premier Inn’s expansion at Manchester Airport, and Travelodge’s continued growth in coastal and port cities. Luxury brands such as Rosewood Hotels, Six Senses, and Auberge Resorts are also making their mark, introducing high-end offerings in prime London locations. Additionally, B&B Hotels is broadening its footprint with multiple new sites across the UK. The surge in new hotels is driven by a combination of different factors; increase in travel demand, investor confidence and economic recovery. According to Cushman and Wakefield’s European Hotel Transaction report, hotel investment transactions in Europe were up by 49% year-on-year in the first half of 2024. And while full-year numbers are still being finalised, the firm expects total investment volumes to hit approximately €22bn (£18.30bn) - a 35% year-on-year increase. This year, the forecast is for that number to surpass €25bn (£20.7bn). For Cushman and Wakefield, this demonstrates “the clear attraction of hotels to capital rich investors who recognise their inherent growth potential and the opportunity to undertake value-add asset management”. Michael McCartan, VP of EMEA at IDeaS Revenue Solutions, also believes that investors see hospitality as a resilient, high-potential industry, driving significant investment. “London remains a key investment hub, but regional cities like Manchester, Edinburgh, and Birmingham are also seeing strong growth,” he says. McCartan also stated that the rise in travel demand has also contributed to the rise in new hotel experiences. He says that people are eager to spend on experiences, from weekend city breaks to luxury getaways. Software platform SiteMinder also found that the UK ranks among top 10 travel destinations for 2025, above Thailand, Turkey and Greece. The report highlighted strong interest among incoming travellers from Canada––where the UK was the third preferred travel destination for next year, Australia (4th) and Spain (4th). Respondents from heavyweight source markets such as the US, Italy and France also expressed strong interest in the UK, with the country ranking sixth in the former two and seventh in the latter. At the same time, cities are also accelerating redevelopment projects, creating prime opportunities for new hotels to meet the growing demand. He says: “Guest expectations are evolving fast. Hotels that deliver personalised experiences, whether through smart technology, unique design, or tailored services, are attracting more attention. It’s not just about location anymore; it’s about differentiation in a competitive landscape. Business travel is rebounding, events are back in full swing, and these cities are investing heavily in infrastructure. Additionally, international visitors are looking beyond London for more unique and less tourist-heavy experiences.” Additionally, McCartan explains that the rise of digital nomads and the blending of business with leisure - known as bleisure travel - means that more people are taking extended trips, seeking places where they can both work and unwind. While London is going to see the most number of openings in 2025, Robert Alley, brand development director at BWH Hotels GB says that the group has seen demand from both urban and leisure destinations over the last 18 months across the North, South, East and West of the UK. “It’s safe to say that demand is fully back to pre-Covid levels in domestic locations and the major cities where international travel is more prevalent are also expecting 2025 to be a year of growth as visitors from the US and Asia return in strength,” he explains. According to CoStar, markets such as Northern Ireland, Edinburgh, Cardiff, and Birmingham have seen an increase in hotel construction over the past 12 months, with more rooms currently under development. Room supply growth is forecast to be highest in Northern Ireland. Over 1,000 rooms are under construction, representing 9% of the existing stock. Leeds is also due to witness the second-greatest growth in room supply this year. CoStar states that the hotel landscape in the northern city has not changed much over the past decade in terms of new openings, although various existing properties have been renovated in recent years,especially in the face of the upcoming additions. Although hotel growth is happening across all hotel segments, experts have highlighted that the majority of growth is still seen in midscale and budget properties, where travelers prioritise affordability, convenience, and flexibility. Alley states that before the pandemic, hotel developments over long-term projects were primarily focused on upscale, premium hotels as well as budget-friendly economy options. However, since the majority of growth is now coming from existing hotels rather than new developments, most of this growth is happening in well-established, midscale, and upscale traditional properties in the UK. McCartan acknowledges that the strong momentum in boutique and lifestyle hotels is driven by demand for unique, personalised experiences, but also points out that budget and mid-range accommodations are growing as well. He says: “Guests are increasingly looking for unique, immersive, and authentic stays, driving demand for hotels with distinctive design, local connections, and a more personalised service. At the same time, budget and mid-range accommodations continue to expand, catering to cost-conscious guests who prioritise convenience and efficiency. While luxury hotels are also growing, particularly in prime urban and resort locations, much of the momentum is in stylish, experience-led midscale properties that offer both value and character.” Karim Malak, CEO of EasyHotel also highlights that the budget hotel sector is seeing strong growth as “more travellers prioritise affordability and flexibility”. The hotel group is known for providing high-quality essentials (like our 4-star style mattresses) at a lower price point, allowing guests to spend more on experiences. Simultaneously, its business model is focuses on core comforts and encourages guests to explore local restaurants and attractions, aligns with evolving travel preferences. “Consumers are increasingly looking for cost-effective stays that allow them to spend more on experiences outside the hotel, such as dining at local restaurants and exploring city attractions. This shift is driven by the cost-of-living crisis and a growing preference for minimalist, functional stays,” Malak explains. Additionally, Malak notes that business travellers are also showing increased interest in budget hotels, as companies seek to control travel costs while maintaining convenience and comfort. He adds: “At EasyHotel, we have observed significant demand in key urban and transport-connected locations, as well as regional hubs where affordability is a primary factor in travel decisions.” However, with major global brands expanding their portfolio, independent and small hotels tend to face several challenges. McCartan believes that one of the biggest hurdles independent hotels face is brand awareness and trust. He states that without the recognition or sophisticated loyalty programmes of larger chains, independents have to work harder to establish their reputation. However, this also presents an opportunity for them to promote their biggest advantage, “offering a truly local and authentic experience that big brands often struggle to replicate”. Another challenge independent brands face is distribution and marketing, according to McCartan. “Large hotel groups have strong relationships with OTAs and bigger budgets for digital advertising, while independents often have fewer resources,” he explains. Therefore, to stay competitive, McCartan suggests that smaller hotels “need to focus on strategies that encourage direct bookings, such as personalised offers, strong website experiences, and effective use of social media”. Lastly, McCartan notes that technology is another area where independents can fall behind as many still rely on manual processes or outdated tools. He recommends that to remain agile in a fast changing market, independents must invest in technology to “improve pricing strategies, streamline operations, and enhance the guest experience”. “Those who embrace these tools will be better positioned to compete with the bigger brands,” he says. While the 2025 outlook for hotels looks positive, experts warn about the challenging economic conditions, shifting guest expectations and rising labour costs. Alley says that last year showed demand ahead of levels seen before the pandemic from almost all markets, but while travel may be back in full alongside the return to office, the economic and political environment adds “complications and pressure which undermine the progress made in recent years”. Marak also explains that while tourism continues to rise, economic challenges such as the cost-of-living crisis in the UK have “increased demand for budget-friendly accommodation”. Furthermore, McCartan adds that although investment in hospitality remains strong, rising construction and operational costs mean “profitability requires careful management”. He also states that inflation and interest rates impact pricing, making revenue management “more critical than ever”. Additionally, while demand for high-end, unique stays is rising, “affordability remains a key factor, driving expansion across both luxury and budget segments.” For hoteliers looking to launch or expand in a competitive market, Tara Colpitts, senior director of Market Management at Expedia Group, advises focusing on their hotel's unique strengths and leveraging digital marketing to stand out. She says that by using compelling and targeted ads hoteliers can boost visibility to the right people at the right time. Online travel agents (OTAs) are also growing in popularity, and they can also be leveraged to help guide travellers in the right direction. Despite this massive recent uptick in demand, recent Expedia Group research reveals three in five travellers do not have a specific destination in mind or consider multiple destinations when they first decide to take a trip. As a result, Colpitts states that hotels have a “unique chance to capture demand through tailored, timely offers that can help them stand out amidst an increasingly competitive landscape”. Malak emphasises the importance of a scalable model across regions, citing EasyHotel’s success in applying its UK strategy across Europe, where two-thirds of its revenue now originates. He highlights the need for forward-thinking, particularly in technology and sustainability, noting that EasyHotel’s low-carbon model will emit 39% less CO₂ over 50 years. Looking ahead, he sees strong demand for budget hotels, driven by cost-conscious travelers and large-scale events. In 2023, over 19 million music tourists boosted demand for city-center hotels, and with 90% of EasyHotels near public transport, the brand is well-positioned to meet this need. Overall, Europe shows 106,729 projected room openings in 2025, including those already opened this year. According to CoStar supply-side pressures across the UK have been limited. Rooms under construction have been trending downwards and stabilising at around 19,000, which is equivalent to just under 3% of the existing room stock. It also highlights that challenges in the construction industry have hindered development activity in the past two years, and that may continue, with planning regulations also being a “key risk to future development”. However, sought-after destinations such as London and Edinburgh, which have a varied business mix alongside key urban markets, will continue to experience increased developer and operator interest, with brand and asset conversions likely underpinning new openings in the near future.