London Market Spotlight – FY 25

OVERVIEW

London remains one of Europe’s strongest hotel markets, with occupancy levels reaching 84% in 2025, supported by a healthy mix of leisure and corporate segments.

Despite labour pressures and softer demand, the sample of 21 branded full‑service hotels in central London recorded steady bottom-line performance during 2025. The profit level (GOP PAR) remained broadly stable at £135.5 (-0.1% y-o-y) despite a 0.6% decline in total revenue.

Rooms revenue marginally softened, with RevPAR declining by -0.9%, driven by a -0.5% drop in occupancy and a -0.4% reduction of ADR to £278.9. Conversely, F&B revenue recorded a slight increase of +0.6% year-on-year.

In terms of seasonality, occupancy remained broadly stable throughout the year, with the steepest decline in February (–5.0%), before improving in April (+1.9%) and November (+0.9%) compared to 2024. The peak month was July, with 92.7% occupancy, supported by major events, whereas January recorded the lowest occupancy at 66.5%.

On the expense side, Cost of Sales decreased (–3.7%), while Payroll increased slightly (+0.6%) in line with ongoing wage pressures, including the increase of the minimum wage and employer national insurance contributions. Lower energy prices supported the overall cost decline (–1.0%), driven by a notable reduction in Utilities (–8.9%).

Supply growth in central London was relatively muted, increasing by +0.8% (weighted for opening dates). This was driven by 15 hotel openings, partially offset by several closures.*

Overall, despite a top‑line softening, the branded full-service hotels in central London maintained a very strong profitability profile, with the GOP margin at 46.8% (+0.2pp y-o-y). This resilience was driven by efficient cost management, as evidenced by a high GOP Flex of 92.2%. This result contrasts with a larger sample of hotels in Greater London, which recorded a 1.8% decline in GOP PAR, driven by a 6.7% increase in payroll and a 2.9% growth in cost-of-sales. This may be due to inflation and payroll pressures having a greater impact on lower-rated hotels outside the city centre, which have fewer opportunities to cut costs.

SUPPLY

According to STR, London overall supply increased by 2.1% in 2025, reflecting the partial-year openings in 2024 and 2025.

However, according to public records, 15 hotels opened and 4 closed in central London in 2025, representing 2.3K rooms (+0.8% supply growth weighted for opening dates).

Most of the new room supply was concentrated between Soho (1060 rooms) and Canary Wharf (604 rooms) and positioned within the Economy (49.4%) and Upper Midscale (35.0%) hotel classes.

The supply growth was partially offset by several closures, including the temporary closure of Corus Hotel Hyde Park (389 rooms) for renovation and the partial closure of The Ritz (136 rooms), which is undergoing major refurbishment expected to continue until 2028. Additionally, the Britannia International Hotel Canary Wharf (472 rooms) was permanently closed.

Looking ahead to 2026, up to 30 additional hotels are currently in the final construction phase and are expected to open during 2026. Among the new openings are landmark properties such as Six Senses (109 rooms) and the St. Regis (196 rooms) which are expected to open during the first half of the year.

COSTS

PAYROLL COSTS

Labour expenses in the selected branded hotels in London increased slightly in 2025, reaching £67.9 PAR (+£0.4, +0.6%). The largest increases were recorded in F&B (+£0.4 PAR, +1.8%), followed by A&G (+£0.3 PAR, +3.0%), reflecting continued wage pressure.

COST OF SALES

Cost of Sales decreased to £19.5 PAR (–£0.7, –3.7%), driven primarily by reductions in F&B (–£0.4 PAR, –4.1%) and Rooms (–£0.3 PAR, –2.8%), reflecting improved cost control across operating departments despite continued food inflation.

UTILITY COSTS

Utility costs declined to £10.0 PAR (–£1.0, –8.9%), providing notable relief to overall expenses. Electricity recorded the largest drop (–£1.1 PAR, –13.8%), largely due to easing wholesale energy prices in line with broader UK energy market stabilisation in 2025.

OTHER EXPENSES (excl. Utilities)

Other expenses remained broadly stable at £56.7 PAR (–£0.2, –0.3%). Cost increases in Rooms (+£0.4 PAR, +2.4%) and F&B (+£0.1 PAR, +2.5%) were offset by reduced spending in S&M (–£0.5 PAR, –3.0%) and POM (–£0.2 PAR, –3.9%), resulting in a marginal net decline.

DEPARTMENTAL REVENUES AND EXPENSES

The total revenue decline was driven by Rooms (-£2.1 PAR, -0.9%) and was partially offset by increasing revenue in F&B (+£0.3, +0.6%) and Miscellaneous Income (+£0.1, +2.4%).

The total expense reduction was led by S&M (-£0.5, -2.2%) and Rooms (-£0.3, -0.7%). In contrast, A&G posted the largest increase among expense lines (-£0.3 PAR, -1.3%).