UK hotels see revenue grow as margins remain under pressure

UK hotel performance showed signs of stabilisation in the second half of the year, with revenue growth returning across much of the market, although rising labour and operating costs continued to weigh on profitability.

Speaking at the latest HOSPA webinar, Michael Grove, CEO, HotStats, said the industry had entered 2026 “in a more positive position than it felt this time last year”.

He said: “The first quarter of last year was a difficult start for the UK from a performance perspective. We ended up roughly flat from a revenue point of view, and negative from a profit perspective.

“But actually, we finished the year pretty strong. If you look at the second half of last year, we are entering 2026 with a positive position overall.”

Performance varied sharply by location, with only a small number of UK markets achieving growth in both revenue and profit.

“There are very few markets sitting in the area where both revenue and profit are growing,” Grove said. “Most are seeing modest revenue gains but still struggling to convert that into profitability.”

Markets that exceeded roughly 2.7% revenue growth were more likely to deliver profit growth, a pattern Grove said highlighted the importance of volume and pricing power in overcoming fixed cost inflation.

With limited scope left for cost-cutting, the conversation shifted towards revenue generation, particularly beyond rooms.

HotStats data showed strong growth in ancillary revenues, with wellness, leisure and other non-core services outperforming rooms and food and beverage.

“The biggest opportunities for hoteliers in the UK is to look at commercial strategies and try to see how we can deal with the operational headwinds,” Grove said.

Tina O’Hara, Commercial Director at Cairn Hotel Group, said ancillary revenue had become a strategic focus across the group’s 30-plus UK hotels.

Cairn was targeting opportunities across family travel, pet-friendly stays and wellness, extending the concept beyond traditional spa hotels.

She said: “We always think wellness is related to spa hotels, and we're trying to lift that out of just the spa hotels and into how can we create extra revenue, driving that wellness piece into a bed and breakfast offering in the city centre. None of it is going to double the top line, but all of it will make a difference.”

Despite easing recruitment challenges, labour remained a strategic priority. O’Hara said Cairn was investing heavily in retention and development.

O’Hara said: “When it comes to labour, yes, we are seeing rising costs, but we've taken a real stance; we need to look after the people that are working with us, because recruitment is costly, so we have a real people-first focus happening, and that is very much around investing in the people we've got, looking at management training programmes.

"Hospitality can be a tough industry to work in, but equally, I think sometimes it's a bit of a calling. Once you get into it, you fall in love with it. So we're working hard on on taking those stars and really developing them through communicating with our people and doing all we can to sort of put ourselves out there as a great hospitality company to work for.”