By, Novema Pte Ltd, March 2026
The UK guest accommodation market presents mixed signals. At a macro level, spending has increased since 2023. ONS data shows £36.4 billion spent on paid accommodation, including hotels, homestays and similar services, rising to an estimated £40.0 billion in 2024 and £44.0 billion in 2025.
Short-term lets continue to expand rapidly. In 2024, approximately 90 million guest nights were spent in short-term rentals, accounting for around 37% of overnight tourism spending. According to Hotel Speak, this segment has grown faster than hotels in recent years, reflecting demand for more flexible and homelike accommodation. Homestays and short-term rentals now account for roughly 30% of the accommodation market. However, hotels remain resilient and continue to dominate overall overnight stays.
But guest behaviour is becoming more fluid across accommodation types. According to NAIGlobal, travellers are increasingly switching between hotels, homestays, hostels and serviced apartments due to price pressures, demand for varied experiences, and changing travel patterns.
Rising room rates and broader cost-of-living pressures are prompting many travellers to trade down to cheaper tiers, shorten stays, or choose properties further from city centres. At the same time, demand for homestays has increased as travellers seek greater local immersion.
Post-pandemic preferences have also shifted toward self-contained accommodation, such as entire homes, small hotels and apartments, offering greater privacy and control over contact with others. However, this preference is partly perceptual, as hygiene standards in hotels are often higher than in homestays.
Overall, the hospitality sector is expected to grow steadily toward 2030, though market conditions remain uneven. Hotel revenues have improved, with £1.04 billion in hotel transactions in Q3 2025, up 24% year-on-year (Savills). However, operators face tighter margins and slower growth. Rising labour costs, driven by higher minimum wages and employer National Insurance contributions, alongside increasing energy costs and labour shortages, are placing pressure on profitability.
Supply constraints are providing some support. Limited new hotel supply has helped lift occupancy rates, although the pipeline of serviced apartments is expanding. The UK is expected to account for around 30% of new European serviced-apartment supply over the next five years.
Demand patterns are also shifting geographically. Secondary and tertiary locations such as Milton Keynes, Reading, Staines and Derby are seeing increased bookings. This reflects corporate travel trends, including shorter project-based relocations, hybrid working patterns, and companies in sectors such as technology, consulting, banking and financial services relocating activities to lower-cost regions of the UK.
New business models
One of the most notable developments in the UK guest accommodation market is the way the sector is evolving by property type. While the homestay segment has grown rapidly through platforms such as Airbnb, investors are increasingly focusing on serviced apartments and aparthotels. The UK serviced-apartment market is projected to grow at around 8–9% CAGR over the long term.
Growth in this segment is driven by longer business stays and relocations, the rise of “bleisure” travel, and increasing demand for more space and residential-style amenities. Demand for longer business stays is being supported by several factors:
- Hybrid work and “bleisure” travel – employees increasingly combine business travel with remote working. For example, a consultant travelling to London for a two-day meeting may extend the trip for a week while working remotely and adding leisure activities.
- Project-based work and consulting assignments – teams may be deployed for weeks or months for activities such as consulting projects, IT implementation, or construction programmes.
- Corporate relocations and talent mobility – employees often require temporary accommodation before securing permanent housing, with demand particularly strong in cities such as London, Manchester, Cambridge and Edinburgh.
- Cost efficiency of longer stays – extended stays can be cheaper than repeated short trips due to lower travel costs and volatile hotel rates.
- Immigration and housing timelines – foreign workers may face longer processes for visas and securing accommodation, increasing the need for temporary housing.
Operators and investors increasingly view this segment as more resilient than traditional hotels.
More broadly, the UK paid accommodation market is shifting away from a hotel-dominated model toward a more flexible and mixed accommodation ecosystem. Hybrid formats are expanding, and the boundaries between accommodation types are becoming increasingly blurred. Examples include aparthotel and co-living hybrids and mixed-use developments combining hotels, apartments and branded residences.
Hybrid accommodation combines the space and facilities of an apartment with hotel-style services. Typical features include fully furnished units, reception services, housekeeping, security and shared amenities.
These formats are becoming more popular due to the growth in extended stays, particularly for project work, relocations, digital nomads and hybrid workers, as well as consumer demand for larger spaces, kitchen facilities and lower rates for longer stays. They can also offer greater safety and more professional management compared with homestays.
For “bleisure” travellers, hybrid accommodation is particularly attractive because it provides separate sleeping and living areas, the ability to cook or host visitors, and reduced spending on restaurants.
From an investor perspective, hybrid accommodation is appealing for several reasons:
- The ability to serve both short-stay and long-stay demand
- Lower housekeeping frequency than traditional hotels
- More predictable revenue streams
- Higher revenue per square metre, driven by:
- Guests spending more time in their units rather than in large, shared spaces such as restaurants, meeting rooms or ballrooms (traditional hotels typically allocate 20–30% of space to public areas)
- More stable occupancy and fewer gaps between bookings
- Lower staffing requirements
- Broader appeal across different guest segments
Summary
In the last year, the UK guest staying market has been characterised by:
- Rapid growth in serviced apartments and aparthotels
- Gradual but uneven recovery in the hotel sector
- Blurring of accommodation types (hotel–residential hybrids)
- Supply constraints alongside a growing pipeline
- Demand shifting toward regional and secondary cities
- Cost inflation and labour shortages impacting operators
- Increasing demand for flexible and extended-stay accommodation
- The market moving away from traditional hotel-dominated models toward a more flexible, mixed-use accommodation ecosystem.
