Challenges are mounting for United Kingdom’s budget and economy hotel segment, but technology and relationships are mellowing any discomfort.
General cost increases for hotels and less disposable income for consumers — coupled with macroeconomic noise, including tariffs and visa uncertainty — have resulted in hoteliers becoming much more granular in their operating models.
Tori Ackling, group commercial director of Legacy Hotels & Resorts, said the landscape for lower-priced hotels is tough commercially, but the key is to make sure employees at the hotel and corporate level are motivated and understand and appreciate the business strategy.
“Ultimately, it’s tough, especially in a commercial role. … Everyone says we need more sales to mitigate any rising costs, but it is not as simple as that because the pass-through costs,” she said as part of a roundtable discussion. “With food inflation being higher than anything else, you can’t then say I’m going to put the price of a lasagna up by £10 [$13.56], and I’m going to put the room up by £50.”
Edinburgh-based Legacy Hotels & Resorts manages 23 hotels in the U.K, mostly via partnerships with internationally branded hotel firms — Accor, Hilton, Marriott International, among others — but also with four independents. Founded in 2025 when it acquired three former Corus-branded hotels, Legacy has full management contracts with 17 of the hotels, the other six having asset-management contracts.
Some hotels in Legacy's portfolio include large conference centers, and in recent weeks meeting planners have called to cancel events due to tariffs, Ackling said. Inevitably, clients come up with the same excuses that they used during COVID-19, but “to be fair, they’ve been good. They’ve paid their cancellation charges,” she added.
“You have to stick close to it … [we] try to play our relationship card with some of these big clients that we’ve worked with for a number of years,” she said.
U.K. visa requirements are playing a part in limiting some hotel demand, too.
“We have heard from people saying we’re seeing a drop in reservations because of this,” said Sandip Hiremath, head of commercial, hotels at Welcome Break Holdings.
Newport Pagnell, England-based Welcome Break specializes in management of motorway/freeway-side hotels, all branded either with Wyndham Hotels & Resorts' Days Inn or Ramada brands. Welcome Break has 31 hotels — 28 in England, two in Scotland and one in Wales — with a combined 2,195 rooms.
Both Legacy Hotels & Resorts and Welcome Break have hotels at major English airports, and Welcome Break manages 59 motorway service stations around the U.K. Across its hotels and service stations, it welcomes approximately 19 million customers a year.
Hiremath said 85% of his business is domestic.
“We’re not reliant on the U.S. [clientele] even if our brands are U.S. ones,” he said.
That said, domestic hotel demand in the U.K. has softened, Hiremath said.
“Household income is falling, but the corporate segment has done well, although Wednesdays year on year are not performing well,” he said.
Welcome Break's hotels have seen cancellations in the group demand segment from China, Hiremath said.
“[That business line is] also non-commissionable. Groups are part of our strategy as they allow us to reduce costs,” he added.
Legacy also is not seeing a lot of U.S. inbound demand, and Ackling has noticed softer hotel demand around U.K. public holidays and long weekends.
Another concern is government contracts with hotels to house asylum seekers are coming to an end, resulting in increased supply as these properties return to the market.
“There is not much on the books, so revenue management is absolutely key. Every penny is looked for in every room,” Ackling said. “If you can get the pricing right, if you can get the days of the week right with group business, it is very profitable for you and gives you that base.”
Overall, there's just more competition for hotels in the U.K. budget and economy segments to win bookings, she said.
Proposals to implement city tourism taxes is less of a concern. Ackling said the hospitality industry continues to pass on these costs to the consumer, but in the case of city taxes, she did not think they would deter bookers.
However, there are silver linings. Ackling said relationships with hotel brand companies and property owners are stronger than ever. Hotel back-of-house processes and strategies across the last five years have grown more efficient, Hiremath added.
Labor and economic concerns
A persistent challenge for U.K. hotels has been filling open positions. Recruiting and hiring employees at U.K. hotels remains difficult, and Hiremath said labor costs have been escalating since 2021.
“Eighty percent of those involved [food and beverage]. Our focus is back on Europe and the U.K.,” he said.
Housekeeping roles are the hardest to fill, Hiremath said.
“We’d struggle to find British people [for housekeeping]. F&B, we’re probably OK, and staff at [our service-station outlets], probably OK, too,” he said.
Legacy's housekeeping roles are often outsourced, which allows the company to pay only for rooms that are cleaned, Ackling said.
Wage pressures are also contributing to recruitment and hiring issues in hospitality, Ackling said.
“Sales roles are tough to find the right people because of wage levels,” she said, adding high turnover is nothing new.
Despite hiring restraint, Ackling said it makes economic sense to hire revenue managers, group agency sales managers and cluster managers.
“Everyone is out there fighting for this business, and we have to show clients we’re doing everything we can for their businesses,” she said.
On May 19, one day before the roundtable, the U.K. and European Union governments met at an official summit for the first time since Brexit. Issues on the table included youth mobility across the continent and easing imports and entry requirements.
Michael McCartan, area vice president for Europe at revenue-management software firm IDeaS, said there is a growing demand for governments to remove restrictions of movement for people under 30, something that likely would help the hotel industry.
The day after the roundtable saw the U.K. government release April inflation numbers, which increased 3.4% year over year.
A note on May 20 from Kate Nicholls, CEO, UKHospitality, said “it’s clear that, on top of continuing hikes in utility prices, the raft of additional costs from the [government’s Oct. 2024] budget, which came into force in April, is putting unsustainable cost pressure on already strapped businesses.”
Advancements in tech
Technology and revenue management are critical to stripping out costs and finding the right demand and converting that at the right price. Hiremath said his company is focusing on optimizing staff, investing in new payment gateways and kiosks, bidding on keywords, upselling and lessening the dependence on online travel agencies.
“That is a controllable cost. When I started very little came directly. Our one goal is to displace OTAs. We’ve seen 800,000 new direct customers,” he said, adding he's spoken with his brand partners to stop them bidding on the same keywords.
Another strategy is renegotiating tech deals to see what is needed and not needed.
“We’re in the economy sector, so margins are key,” Hiremath said.
With guests being more “price-sensitive at weekends … that level of detail has gone in now, given the pressure we’re in,” he added.
One of Welcome Break's simple tweaks is making sure guests in the booking process select the number of guests coming to any room on any room night. It's effective at saving costs on housekeeping, he added.