Heatwave drives up utility costs for hoteliers in July
Hotel demand held up over the summer, but consumers trying to keep cool during the heatwave pushed up utility costs and ate into profit margins, according to the RSM UK Hotels Tracker.
The data, which is compiled and produced by Hotstats and analysed by RSM UK, shows utilities expenses per occupied room of UK hotels rose from £8.45 in July 2025 to £9.15 in July 2026, and from £8.91 to £10.10 in London.
At the same time, average daily rates (ADR) of occupied rooms increased by 4% in both the UK, from £176.29 in July 2025 to £182.47 in July 2026, and from £264.34 to £274.40 in London. Revenue per available room (RevPAR) in the UK rose from £152.55 in July 2025 to £155.89 in July 2026, and from £238.15 to £242.57 in London.
Occupancy of UK hotels was down slightly from 86.5% to 85.4% in July year-on-year and fell from 90.1% to 88.4% in London. Gross operating profits were also down from 43.9% to 43% in July year-on-year in the UK and from 49.2% to 47.7% in London.
Chris Tate, partner and head of hotels at RSM UK, said: “The UK heatwave over summer has helped hotel demand stay high, allowing hoteliers to make hay while the sun shines with inflation-busting room rates. But the hotter weather has also meant greater use of aircon in hotel rooms as consumers tried to keep cool, leading higher utilities costs to eat into profit margins.
“It’s clear that charging higher room rates is no longer enough on its own to maintain profits and hoteliers must explore other cost-cutting initiatives and ways to create efficiencies. The good news is that consumer confidence appears to be on the up, which should bode well for the hotel industry, but the concern will be whether a tax-raising budget in October reverses all that progress.”
Thomas Pugh, chief economist at RSM UK, added: “Robust hotel demand matches the signal from other data such as solid credit flows, improving confidence and accelerating car sales, which all suggest consumers were willing to smooth through elevated inflation by saving less and borrowing a little more throughout the summer. That bodes well for consumption growth in Q3.
“However, growth is still likely to slow as we head into the winter. Inflation will peak close to 4% in Q4 and stay close to that level in Q1 as higher energy prices begin to push up airfares, manufactured goods and food prices, which will all prevent inflation from returning to target until 2028. That, alongside the prospect of another big tax-raising budget are likely to mean consumption growth slows to around 0.1% in Q4, compared to 0.5% per quarter in the first half of the year.”