The outlook for UK hotel market demand in 2025 appears to suggest a generally positive picture. While the below average UK GDP growth of 1.6% in 2025 could dampen UK domestic business and leisure demand, UK interest rates are predicted to reduce resulting in a weakening pound. This could boost inbound tourism with the relative affordability of the UK for international travellers.
There are obvious timing risks to this growth scenario, and overall demand may still be affected by global economic uncertainty and the potential for increased geopolitical disruption. However, if we discount these downside risks, we anticipate a return in inbound travel to 99% of pre-covid levels, driven by growth from the U.S., Europe, and Asia.
“The 2025 outlook for the UK hotel market is cautiously optimistic. While below-average GDP growth and softening consumer and business confidence could weigh on domestic demand, there is potential for inbound tourism to strengthen if interest rates continue to fall, with the knock on impact on the value of the pound. Despite global uncertainties, resilience in travel, especially from the US, Europe and Asia, offers encouraging signs.”
Simon Hampton
Partner, Real Estate & Hotels Corporate Finance, PwC UK
The UK hotel industry faces significant challenges from above inflation increases in employer NIC costs, the minimum wage, and property rates due in April 2025. Hotel investors and operators need to consider their productivity and investment strategies, to minimise the impact of these cost pressures going forward:
Implement 'cost out programmes' to mitigate cost increases by providing detailed visibility into cost-saving initiatives and tracking progress. Operational cost benchmarking can reveal performance disparities and highlight savings opportunities in areas like third-party distribution, utilities, food and beverage, and labour efficiency.
After the biggest drop in over two years, consumer sentiment has reached 2024’s lowest level. While economic indicators remain strong, with inflation stable, real wages increasing and more interest cuts likely, this hasn’t translated into optimism among consumers.
There was a lot in the Chancellor's Autumn Budget which impacts the workforce. We saw a significant increase in employer's National Insurance contributions and changes to the threshold at which employer's start to pay National Insurance.
UK Hospitality, Sports & Leisure leader, PwC United Kingdom
Tel: +44 (0)7710 627834
