CoStar Reports Rising U.K. Hotel RevPAR Trends
New data released by CoStar Group shows that the United Kingdom’s hotel sector experienced positive momentum in March 2026, with revenue per available room (RevPAR) continuing to trend upward despite broader economic pressures and changing consumer travel behavior. The report highlights growing resilience within the domestic hospitality market as regional tourism activity and staycation demand help support hotel performance across several major U.K. cities.
According to CoStar’s latest hospitality market analysis, the U.K. hotel industry recorded a 1.2% year-over-year increase in RevPAR during the first quarter of 2026. RevPAR, a key performance metric used across the hospitality sector, combines occupancy levels and average daily room rates to measure how effectively hotels are generating revenue from available rooms.
While occupancy rates across the country remained relatively flat during the quarter, improved room pricing and strong event-driven demand in several regional cities contributed to overall revenue growth.
The report identified cities including Glasgow, Manchester, Cardiff, and Birmingham as key contributors to the quarter’s improved hotel performance. Conferences, sporting events, concerts, and business travel activity in these regional markets helped maintain stable occupancy levels while supporting stronger hotel revenues.
Hospitality analysts say the performance demonstrates how regional destinations are becoming increasingly important drivers of the U.K.’s tourism and lodging economy. As travelers seek shorter domestic trips and event-focused experiences, many cities outside London are benefiting from growing tourism diversification and infrastructure investment.
At the same time, the industry continues navigating broader economic uncertainty and shifting consumer spending patterns. Separate findings from the Barclays UK Consumer Spend Report revealed that travel spending declined in March for the first time in five years. The report showed year-over-year spending decreases across multiple travel categories, including airlines, travel agencies, and public transportation.
Despite those declines, hospitality experts believe reduced international travel could create new opportunities for domestic tourism operators throughout the United Kingdom.
Cristina Balekjian, principal market analyst at CoStar Europe, noted that changing consumer travel behavior may ultimately benefit domestic hotel demand over the coming months.
“The Barclays UK Consumer Spend Report also showed travel spending fell in March for the first time in five years, with year-on-year declines across travel agents, airlines and public transport,” Balekjian explained. “Cancellations of overseas travel plans could boost demand for domestic staycations, as seen over the Easter weekend when demand spiked from Good Friday to Easter Sunday, although rate growth remained challenging.”
The Easter holiday period provided an early indication of how domestic tourism trends may shape the 2026 summer season. Hotels across several U.K. leisure destinations experienced notable increases in occupancy and booking activity during the long holiday weekend as more travelers opted to vacation closer to home.
Industry observers say concerns surrounding international travel costs, economic uncertainty, currency fluctuations, and broader geopolitical issues are influencing consumer decisions, leading many households to reconsider overseas trips in favor of domestic destinations.
This shift toward “staycations” — vacations taken within one’s own country — has become an increasingly important trend for the U.K. hospitality industry since the pandemic era and continues to influence hotel demand patterns across the country.
Regional tourism markets appear particularly well-positioned to benefit from this trend. Coastal destinations, countryside resorts, and culturally significant regional cities are seeing increased attention from domestic travelers seeking shorter, more affordable leisure experiences without the complexity of international travel.
The CoStar report suggests that demand from British travelers may provide a significant boost to the hospitality sector throughout the upcoming summer season. Hotels serving domestic leisure markets are expected to perform especially well as families and travelers prioritize convenience, affordability, and local experiences.
However, analysts caution that not all markets are positioned equally.
While regional destinations driven primarily by domestic tourism may benefit from increased staycation demand, London could face more challenging conditions due to its greater reliance on international and long-haul travelers. London’s hotel market traditionally depends heavily on overseas tourism, international business travel, and global events, making it more sensitive to fluctuations in international travel activity and global economic conditions.
International tourism to London has been gradually recovering in recent years, but hospitality analysts note that ongoing economic headwinds and reduced discretionary spending among some travelers could continue affecting the pace of recovery in the capital city.
At the same time, the U.K. hotel industry continues managing operational pressures, including rising labor costs, inflation, energy expenses, and staffing challenges. Many hotel operators are balancing the need to maintain competitive room pricing while protecting profitability in a highly dynamic market environment.
Rate growth, in particular, remains an area of concern for many hospitality businesses. Although demand levels have shown signs of improvement, some operators are finding it difficult to significantly increase room rates without affecting occupancy levels, especially in price-sensitive markets.
Nevertheless, the modest RevPAR growth recorded during the first quarter is viewed by many industry professionals as a positive indicator of resilience within the sector. The ability to maintain stable occupancy while increasing overall room revenue suggests that travelers remain willing to spend on hospitality experiences, particularly when tied to events, leisure activities, and regional tourism.
Large-scale concerts, sports competitions, conventions, and cultural festivals continue playing an important role in supporting hotel demand across the country. Cities capable of hosting major events have seen measurable economic benefits through increased hotel bookings, restaurant activity, and tourism spending.
The hospitality sector also continues adapting to evolving traveler preferences. Many hotels are investing in upgraded guest experiences, technology integration, wellness amenities, and flexible booking options to attract both leisure and business travelers in an increasingly competitive market.
Sustainability has also become a growing priority within the industry. Travelers are paying greater attention to environmentally responsible tourism practices, prompting hotels to implement energy-efficient operations, waste reduction programs, and sustainability-focused initiatives.
Looking ahead, industry analysts expect domestic tourism trends to remain a critical factor shaping hotel performance throughout the remainder of 2026. If international travel demand remains subdued, regional hospitality markets may continue benefiting from travelers choosing U.K.-based leisure experiences.
CoStar’s findings suggest that while challenges remain, the overall outlook for the U.K. hotel industry is cautiously optimistic. The combination of resilient domestic travel demand, regional event activity, and continued staycation interest could help sustain positive RevPAR growth throughout the year.
For hotel operators, success in the months ahead may depend on their ability to adapt to shifting traveler behaviors, manage operating costs effectively, and capitalize on opportunities within both domestic leisure and event-driven markets.
As the summer travel season approaches, hospitality businesses across the United Kingdom will be watching closely to see whether staycation demand continues strengthening and whether regional tourism markets can maintain the upward momentum seen during the first quarter of 2026.
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