Top ten predictions for the hospitality sector in 2025

The hospitality sector has repeatedly demonstrated resilience. The sector is rebounding from COVID-related disruptions and inflation. With interest rates declining and incredible Artificial Intelligence (AI) advancements enabling cost reductions, operational efficiencies, linking sustainability to growth and enhanced guest experiences, the sector is swiftly adapting to new norms.

One thing that remains the same and must continually be at the top of every hotelier’s priority – “how can I ensure a memorable, seamless, guest experience?”.  

Whilst not without its challenges, 2025 will be an incredible year for our sector. In this article, hospitality partner Nadia Milligan shares her  top ten predictions for the sector:

Growth Sectors

1. Short Term Rentals (STR)

In a post-pandemic world, digital nomads are driving demand for STRs designed with smaller units and larger communal spaces, combining private living with social and flexible working options. Leisure travellers also value the home-like feel and kitchen facilities of STRs, with optional add-on services like housekeeping, childcare, and grocery delivery.

The UK&I STR market offers significant growth potential, with hotspots like London, Manchester, and Dublin. STRs typically generate higher revenues than traditional hotel rooms as guests tend to stay longer and the operating costs are lower than full-service hotels.

The STR market is being shaped by independent operators who are not locked into rolling out brand standards, offering unique experiences.

2. Branded Residences

This sector is poised for rapid growth, fuelled by resilience during the pandemic (owners continued paying fees), surging demand from high-net-worth buyers seeking hassle-free luxury living, and developers reaping significant profits. Investor interest has broadened to include institutional investors, sovereign wealth funds, and individual developers, intensifying competition.

With branded residence developments pushing boundaries for adventurous locations, unique and immersive experiences, the sector has seen a plethora of market entrants, including motoring brands (e.g. Aston Martin, Porche and Bentley), fashion brands (e.g. Fendi, Missoni and Bvlgari), restaurant brands (e.g. Nobu and Hard Rock). With established international hospitality giants who have been in the game from the outset (including Four Seasons who launched the modern concept in 1985), differentiation and tailored strategies are critical to stand out.

With hotels taking an average of 3 to 4 years to stabilise, standalone branded residences are on the rise, offering monetisation during development (subject to local law requirements e.g. Dubai’s escrow law).  An exciting sector to watch!

3. Focused Service Hotels

Focused service hotels have always been and will continue to be popular. They are expected to grow in secondary cities, due to their ability to meet the evolving needs of cost-conscious and convenience-seeking travellers, seeking affordable but reliable stays.

Developers are seizing this opportunity, recognising the segment’s profitability, resilience, and adaptability. These hotels require less capital to build and operate than full-service properties, as they are often smaller in size and do not include expansive facilities like multiple restaurants or event spaces. By reducing operational complexities, operators can focus on delivering high-demand amenities and maintain strong profitability.

International hospitality brands are accelerating their expansion plans for the focused service segment with Marriott expanding its Courtyard and Fairfield by Marriott properties and Accor growing its Ibis, Ibis Style and Ibis Budget properties.

Increased Use of Multi-Faceted AI

4. AI Driving Sustainability

The sector is increasingly leveraging AI to reduce their environmental footprint by focusing on climate control, lighting, local sourcing, waste reduction, and eco-friendly amenities to attract environmentally conscious and corporate travellers. Automation and robotics further enhance resource efficiency, from energy usage to staff allocation, improving both operations and sustainability.

Sustainability presents a key opportunity, benefiting both hoteliers and eco-conscious guests. Leveraging AI for energy optimisation, such as automatic shut-off systems, and purchasing locally to lower carbon footprints are pivotal strategies.

5. Increased Integration Between Building Management Systems (BMS) and Property Management Systems (PMS)

A BMS collects operational data (e.g. HVAC, lighting, maintenance alerts) to optimise energy efficiency, while a PMS manages administrative tasks like maintenance requests. Integrating the two provides real-time insights, enabling AI-powered sustainability to improve energy, water, and waste management without affecting guest experiences.

A BMS feeding data into a PMS enables:

• Automated work orders and notifications, eliminating manual tracking.
• Insights into energy patterns for improved efficiency.
• Enhanced guest experiences through automated maintenance communication.

6. Automation

AI offers numerous opportunities to enhance the customer journey.  Automated tools like booking confirmation, online check-in; collecting guest feedback; booking spa treatments; ordering room service… the list is endless! AI can reduce guest friction and free up staff to focus on personalised interactions, boosting productivity and service quality.

AI also optimises inventory management, ensuring ideal stock levels, and leverages real-time trends and historical data for better demand forecasting and pricing strategies. Predictive analytics and data-driven personalisation unlock upselling and cross-selling opportunities tailored to guest preferences – data driven hyper-personalisation could be a game-changer.

The Built Environment – Green is the New Gold!

7. Sustainability Credentials

Businesses who fall under the Corporate Sustainability Reporting Directive (CSRD) will be required to make their first CSRD disclosures in their 2025 management report using 2024 data, including the impact of corporate travel. Hoteliers with corporate guests who fall under the CSRD umbrella will be required to provide ESG data to such guests and eco-friendly guests requesting ‘an ESG receipt’.

Developers will increasingly be required to embrace sustainability in design and refurbishment, incorporating energy-efficient systems, waste reduction, and eco-friendly construction, aligning with regulatory, consumer and investor priorities.

8. Adaptive Re-use

Repurposing vacant heritage buildings in prime locations is increasingly cost-effective as planning authorities gravitate towards the retention of unused buildings. Adaptive re-use preserves existing elements like walls and foundations, reducing the need for carbon-intensive materials such as concrete and steel — a major win for cutting embedded carbon.

Adapting buildings in underused areas can also reduce new build construction on greenfield land, whilst breathing life into unused buildings, stimulating local economies and revitalise neighbourhoods. With a growing demand from guests for unique experiences and authenticity, adaptive re-use projects often embody these values.

9. Circularity

Circularity emphasises reusing and regenerating resources to reduce waste and pollution. Adopting this model can lower a hotel’s environmental impact, optimise costs, and enhance guest experiences.

Key practices include robust recycling programs, donating excess food, replacing single-use items with durable alternatives and prioritizing durable, repairable, and recyclable materials to minimise waste and reduce operating costs. Partnering with local suppliers further cuts transport emissions and supports communities.

AccorInvest exemplifies circularity by prioritising carbon, certification, and non-toxic materials that can be dismantled, reused, or recycled. They work with FF&E suppliers to create sustainable, adaptable furniture with minimal environmental impact.

10. Increased Enforcement by the Environment Agency – The Energy Savings Opportunity Scheme Regulations 2014 (ESOS)

Hospitality assets are energy-intensive, making ESOS both a challenge and opportunity for the sector. Businesses with 250+ employees, £44M+ turnover, or a £38M+ balance sheet must conduct energy audits every four years to identify savings in HVAC, lighting, transportation, and more, often requiring capex (e.g. energy-efficient retrofits).

Although the Environment Agency extended the Phase 3 submission deadline (from 5 December 2024) to 5 March 2025, it has warned of increased enforcement. Non-compliance risks hefty penalties: £5,000 for record-keeping failures, £50,000 for missed audits, and £50,000 for false statements.

If you have questions on the topics mentioned above, please contact Nadia Milligan.