LONDON HOTEL MARKET FEELS PRESSURE AS OVERSEAS DEMAND SOFTENS
LONDON HOTEL MARKET FEELS IMPACT OF GLOBAL UNCERTAINTY AS DOMESTIC DEMAND SUPPORTS UK SECTOR
London’s hotel sector came under renewed pressure in April as geopolitical uncertainty and softer international travel demand weighed on occupancy levels, although the wider UK market continued to demonstrate resilience.
According to the latest RSM UK Hotel Tracker, occupancy across London hotels fell from 78.9% to 77.4% year-on-year, extending a trend that has seen the capital’s hospitality sector increasingly exposed to changing international travel patterns.
By contrast, occupancy across the wider UK edged up from 75.7% to 76.2%, suggesting domestic travellers are helping to offset some of the challenges facing the sector.
The figures highlight a growing divergence between London’s dependence on overseas visitors and the strength of regional demand driven by UK holidaymakers.
London Revenues Under Pressure
While average daily room rates in London increased slightly from £199.95 to £202.29, revenue performance weakened.
Revenue per available room (RevPAR), a key measure of hotel performance, slipped from £157.68 to £156.60 year-on-year.
Operating profitability also came under pressure, with gross operating profit margins declining from 34.1% to 32.5%.
Outside the capital, performance remained more stable.
Average daily room rates across the UK increased from £137.77 to £140.24, while RevPAR rose from £104.36 to £106.88. Gross operating profits remained broadly unchanged at 29.6%.
International Travel Concerns Impact London
Industry analysts believe ongoing geopolitical tensions are influencing travel decisions, particularly among international visitors.
Chris Tate, Partner and Head of Hotels at RSM UK, said: “As nervousness around the Iran war drags on, so does the hit to London’s hotel market with some overseas tourists delaying or cancelling their trips to avoid potential travel disruptions.
“That said, demand in the rest of the UK appears to be holding up as domestic travellers that still want to get away opt for lower-risk options closer to home.”
Recent consumer research suggests concerns around global instability are beginning to affect travel behaviour.
According to RSM, 31% of UK consumers have altered travel plans as a result of recent geopolitical developments, either by postponing holidays, changing destinations or cancelling trips altogether.
The number of consumers planning no holiday within the next 12 months has also risen from 19% before the conflict to 27%.
Staycations Could Provide Summer Boost
Despite near-term challenges, there are signs that domestic tourism could provide support during the crucial summer trading period.
Strong weather conditions during May and the half-term break are expected to have encouraged additional UK travel activity.
Tate said: “Given current geopolitical tensions, consumers are favouring last minute bookings rather than planning in advance. So, provided the hot weather continues over the summer, UK staycations may be the preferred holiday option for many.
“While it’s encouraging to see an uplift in domestic demand, this alone is unlikely to offset the loss of overseas visitors.”
The growing popularity of staycations has become an increasingly important revenue stream for regional hotels since the pandemic, particularly during periods of international uncertainty.
Consumer Spending Faces New Pressures
Looking beyond the hospitality sector, economists warn that broader economic conditions may create further headwinds for consumer-facing businesses.
Thomas Pugh, Chief Economist at RSM UK, believes rising household costs will increasingly influence spending behaviour during the second half of the year.
He said: “It is now inevitable that 2026 will be a tougher year for consumer-facing firms.
“Fuel prices have already surged and Ofgem have confirmed that the energy price cap will jump 13% next month, which will push inflation back to 3.5%.
“At the same time, pay growth is slowing, especially in the private sector. The result is that real wages will stagnate in the latter half of this year.”
However, Pugh noted that consumers are entering the period from a relatively strong financial position, with elevated household savings potentially helping to cushion the impact on discretionary spending.
Industry Remains Cautiously Optimistic
Although challenges remain, the hotel industry continues to show signs of resilience.
RSM expects inflationary pressures to build gradually rather than immediately, providing some support during the peak summer travel season.
The expectation is that domestic tourism, combined with continued demand from business travel and events, will help the sector navigate a period of heightened uncertainty.
For London’s hotels, however, the outlook remains closely tied to the return of international travellers, whose spending continues to play a critical role in the capital’s hospitality economy.
