London’s hotels are full. Business rates are emptying them anyway
London’s hotels filled more rooms in 2025 than almost anywhere else in Britain. Occupancy across the capital settled around 82 to 84 percent for the year, among the highest of any city in Europe. And yet, according to new analysis from the trade publication Skift, London was the one part of the UK hotel market that underperformed.
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The explanation sits in the gap between how full a hotel is and how much money it makes. Revenue per available room, the industry’s core measure of profitability, fell in London for most of the first half of 2025 even as guests kept arriving. Knight Frank’s review of the year found average daily rates falling 2.5 percent year on year over the first six months, a decline steep enough that some of the UK’s biggest budget chains felt it immediately. Travelodge reported an 11 percent drop in Greater London revenue per available room over that period, more than double its national decline. Premier Inn’s London revenue per available room fell 5.5 percent in its fiscal first quarter, against a much smaller 2.4 percent slip across the UK as a whole.
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A stronger second half pulled the annual figures back into positive territory. Full-year London revenue per available room ended up 1.5 percent ahead of 2024, and regional UK matched it with 1.9 percent growth to £79. On paper, that reads as recovery. But it masks how uneven the year actually was, and it says nothing about what has happened to hotel costs since.
New supply is part of the story. More rooms opened in London in 2025 than the market could easily absorb, and a weaker dollar limited how much operators could charge American visitors, historically the guests most willing to pay full rate. The city also hosted fewer of the large-scale events, from state occasions to major sporting fixtures, that reliably push rates up when they land. None of that is new to hoteliers. What has changed since is the tax bill sitting behind the counter.
From April 2026, England’s business rates system was restructured so that properties valued above £500,000 pay a new higher multiplier, funding lower rates for smaller premises elsewhere in retail, hospitality and leisure. Hotels have not benefited from that trade-off the way pubs and smaller venues have. The 2026 revaluation put the median rateable value for a London hotel at £247,000, more than double the £112,000 median in the North West, reflecting London’s higher rents rather than any change in how full its hotels are.
UK Hospitality estimates the average hotel bill will rise by up to £29,000 in the first year of the new system and by roughly £205,000 across three years. The chief executive of the Institute of Hospitality has pointed to one small London hotel group whose bill is set to rise fourfold, from £20,000 to £80,000 a year, a jump that has nothing to do with how many guests walked through the door and everything to do with where the building happens to stand.
For London’s independent and smaller hotel operators in particular, the ones without a national chain’s balance sheet to absorb a fourfold rates increase, 2026 looks less like the year the market recovered and more like the year the bill finally arrived.
The next hotel bill that arrives on a small London operator’s desk will say more about the capital’s tourism economy than any occupancy chart, and EyeOnLondon will be watching whose margins survive it.
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