UK Hotels Earn More in Q1 but Rising Costs Steal the Upside

UK hotels made more money in Q1 2026, but higher operating costs limited the benefit.

HotStats said total revenue per available room, or TRevPAR, rose 2 percent year to date. TRevPAR includes rooms, restaurants, events, parking, spa, and other hotel income, so it gives a fuller view than room revenue alone. The problem is that labor costs rose almost twice as fast, which reduced profit margins.

This shows why RevPAR is no longer enough on its own. RevPAR tracks room revenue, but it does not show how much a booking costs to deliver. A room sold through an expensive third-party channel may look strong in revenue terms, but it can still bring weaker profit than a lower-rate direct booking.

The UK is stable, not strongly growing

The UK hotel market is not in decline, but it is growing more slowly than other regions. HotStats said Europe recorded 5.6 percent RevPAR growth in Q1 2026, while profit increased 12 percent year to date compared with Q1 2025. The UK’s 2 percent TRevPAR growth looks modest beside that wider European performance.

UK hotels already operate with high costs. London has expensive labor, property, and service standards, while many regional hotels have less room to raise prices. When revenue growth is small, even normal cost increases can quickly reduce profit.

Labor costs are the main pressure

Payroll is the biggest challenge. Hotels need staff for housekeeping, reception, restaurants, events, maintenance, and guest service. That makes the sector highly exposed to wage increases.

From April 1, 2026, the UK National Living Wage rose to £12.71 ($17.07) per hour for workers aged 21 and over, a 4.1 percent increase. Younger workers also received higher minimum wage rates. For employees, this supports income. For hotels, it adds pressure when revenue is only rising slowly.

Hotels need to focus on profitable revenue

The answer is not only higher room rates. Hotels need to know which bookings, channels, and services actually improve profit. Direct bookings, paid early check-in, room upgrades, meeting spaces, food and beverage, wellness offers, and parking can all help if they are managed carefully.

GOPPAR, or gross operating profit per available room, shows what is left after operating costs. For hotel managers, this is more useful than only looking at occupancy or RevPAR.

Summer demand may help, but margins remain fragile

Recent demand data gives some support, but not enough to remove the pressure. VisitBritain reported that England hotel occupancy reached 77 percent in April 2026, broadly in line with April 2025. Average daily rate rose 3 percent to £153, ($205.43) and RevPAR also rose 3 percent to £117 ($157.09).

Forward bookings are more cautious. As of May 3, committed occupancy for the rest of 2026 was broadly in line with last year, but June, July, and August were tracking lower than at the same point in 2025. For UK hotels, summer will test whether operators can turn steady demand into stronger profit, not just higher revenue.

This pressure also explains why more hotel groups are looking beyond room revenue. Marriott is expanding day passes and paid access to hotel amenities, showing how properties can earn more from pools, spas, dining, early check-in, late checkout, and other services.

Photo by Patrick Robert Doyle on Unsplash