London Hotel Market Spotlight YE May 2025

OVERVIEW

• The sample of branded full-service hotels in London recorded a healthy increase in profit during the 12-month period ending in May 2025, relative to the same time last year. GOP per available room (GOP PAR) rose by 4.7%, driven by a 2.4% decrease in expenses and a 0.8% revenue increase.
• The drivers of expense savings were the declining cost of Utilities (-£1.7 PAR), followed by reducing Cost of Sales (-£1.4 PAR), especially in the F&B department.
• The revenue growth was driven by the Rooms department (+1.9%), underpinned by a 1.8% rise in occupancy, while ADR grew only marginally, reaching £278. In contrast, F&B revenue declined by 2.9%, falling to £56 per occupied room (POR).
• Occupancy rates increased primarily in the summer months, with July, June, and August increasing by +4.8%, +4.7%, and +4.6% respectively (YoY).
• Overall, due to declining expenses, GOP growth outpaced revenue increase, resulting in a 273% flow-through ratio. Consequently, the GOP margin improved from 44.6% to 46.3%.
• The profit growth was supported by the constrained supply. While there were 23 hotel openings during the last 12 months (+2,641 rooms), it represented only +0.8% supply growth (YoY), including a partial offset by the three hotel closures (- 469 rooms).
  

SUPPLY

• Over the last 12 months (YE May 2025), the London hotel market recorded 23 new hotel openings and re-openings (2,614 rooms).
• The new openings were partially offset by three hotel closures (-469 rooms), all of which were for renovation purposes.
• Overall, the hotel supply in London increased by 0.8%, compared to the same period last year (weighted by opening and closing dates).
• Most of the new supply was branded hotels (76.5%), including several extended stay brands, such as Adagio, YOTELPAD or Viridian Apartments. Overall, 26.8% of the new supply consisted of extended-stay rooms.
• The majority of the new room supply was within the limited-service sector, with Economy class hotels accounting for 45%, followed by Upper Midscale (18%) and Upscale (16%).
• Most of the new hotel supply (61.2%) opened in the three boroughs of Westminster, (31.7%) Hammersmith and Fulham (21.4%) and Camden (8.2%) of the new room supply).
• Some hotels also underwent brand conversions, such as the Crest Collection London (former Cavendish hotel).

COST OF SALES

• Total Cost of Sales decreased by £1.4 PAR (-6.6%), primarily within the F&B (-£0.7 PAR) and Rooms (-£0.6 PAR) departments.

PAYROLL COSTS

• The labour expenses in the selected sample of London hotels remained relatively stable during the last 12 months (YE May), with a minor 0.5% decrease (-£0.3 PAR), reaching £68 PAR. The F&B department led the decline, where payroll dropped by 3.7% (-£0.9 PAR). This was partially eroded by the payroll cost increases across A&G, S&M and POM departments (+£0.2 PAR).
• The minimum wage increase (+6.7%) introduced in April 2025 had only a moderate impact so far, with the payroll cost rising by 2.2 POR (+2.7%) in the last two months (4-5/2025 vs 4-5/2024).

UTILITY COSTS

• Utility costs decreased by £1.7 PAR (-13.8%), driven by a reduction of electricity expenses (-£1.6 PAR).

OTHER EXPENSES (excl. Utilities)

• Other expenses remained relatively stable, recording a minor £0.4 decline (-0.8%) to £56.6 PAR. This was driven by lower costs in the F&B department (-£0.9 PAR), which was partially diminished by a £0.4 PAR increase in the Rooms department.