Hotel occupancy across the UK held firm in February compared to the same month last year, but rising costs and a dip in room rates are beginning to squeeze profit margins, according to the latest RSM Hotels Tracker.
Compiled by Hotstats and analysed by RSM UK, the data shows a slight year-on-year occupancy increase—from 70.8% to 71.5%—while average daily rates (ADR) dipped from £125.96 to £123.69. Revenue per available room (RevPAR) also edged down by nearly 1% across the UK.
Gross operating profit margins followed suit, dropping from 26% in February last year to 23% this year, highlighting growing pressure on the bottom line as the cost of doing business continues to climb.
Chris Tate, partner and head of hotels at RSM UK, said, “The hotel sector has been resilient. For over a year it has followed seasonal trends with incremental growth and higher-than-average room rates, but February saw the first knock to the topline. One month doesn’t make a trend, but labour costs are starting to bite, and that pressure will intensify from April when changes to national insurance contributions and the national minimum wage come into effect.”
The Spring Statement offered no additional support for the hospitality sector, but there may be cause for cautious optimism. Tate pointed to forecasts from the Office for Budget Responsibility (OBR), which suggest that rising disposable income could help offset mounting costs.
“The OBR forecast did confirm an uplift in disposable income which could help mitigate cost pressures if consumers choose to spend more and save less,” he said.
Thomas Pugh, economist at RSM UK, added that real household disposable incomes—seen as a key measure of spending power—grew by almost 2% in Q4 and by more than 4% across 2024. “This puts households in a good position to start increasing consumer spending, if confidence holds,” he said. “The risk is that external shocks, such as a global trade war, could send inflation soaring again, dampening consumer confidence and spending.”
