The future of hotels: growth through asset optimisation, ESG and AI

Few sectors have experienced as much disruption over the past six years as hospitality. From operational challenges brought about by the pandemic to economic pressures, labour shortages and rising development costs, hotel owners and operators have no shortage of challenges to overcome. Yet, despite these headwinds, confidence in the asset class remains high.   

Drawing on conversations at this year’s Annual Hospitality Conference (AHC) and across the wider sector, our Hotels team explores some of the key themes and priorities shaping the market.

Resilience remains a defining characteristic

Confidence in the hospitality sector remains strong, underpinned by sustained travel demand and the enduring appeal of hotels as an operational real estate asset class. Resilience is no longer viewed as a short-term response to market pressures but as a core characteristic of the sector itself.

Luxury hospitality in particular continues to perform well, demonstrating the strength of consumer demand for high-quality experiences despite broader cost pressures. More generally, both investors and operators appear increasingly confident in the sector's long-term fundamentals, supported by the UK's position as a global business, leisure and tourism destination.

Growth through optimisation rather than development

That said, hotel development continues to face significant barriers. Rising construction costs, challenging viability assessments and planning constraints have combined to limit the volume of new-build projects coming forward. Developers and investors are therefore looking increasingly inward, focusing on extracting greater value from existing assets rather than pursuing large-scale development opportunities.

This is creating growing interest in hotel conversions, particularly where underutilised office stock can be repurposed into hospitality-led uses. At the same time, operators are exploring opportunities to increase room counts, reconfigure underperforming space and reposition assets through refurbishment and rebranding initiatives. The ability to identify and follow through with new opportunities will be key to growth over the next few years.

ESG has become business as usual

The conversation around ESG has evolved considerably in recent years. What was once viewed as a standalone sustainability agenda has increasingly become embedded within everyday operational and investment decisions.

For many hotel businesses, the focus is no longer simply on demonstrating environmental credentials. Instead, attention has shifted towards the tangible commercial benefits that sustainability initiatives can deliver, including improved efficiency, lower operating costs and stronger asset performance.

Energy efficiency measures, resource management strategies and sustainability-focused refurbishments are now frequently considered alongside wider business objectives. In this context, ESG is increasingly viewed as a tool for driving operational performance rather than a separate compliance exercise.

The AI opportunity is only beginning

While AI is already influencing many industries, its potential impact on hospitality is only now beginning to emerge.

One area attracting particular attention is the evolution of booking and revenue management technology. As AI-driven tools become more sophisticated, they have the potential to transform how customers search for, compare and book accommodation. Automated booking and rebooking capabilities could significantly alter traditional customer journeys and create new opportunities to enhance guest experience which could lead to a higher premium for cancellable bookings.

At the same time, these developments may present challenges for operators who will need to consider how their products and pricing are presented, compared and selected within AI-driven platforms. As AI becomes more integrated across hospitality operations, businesses that understand and respond to these changes are likely to be best placed to capitalise on future opportunities.

Looking ahead

Taken together, these themes paint a picture of a sector that is evolving rather than standing still. Confidence remains strong, but growth is increasingly being driven by smarter use of existing assets, greater operational efficiency and emerging technological innovation.

In many respects, that agility may prove to be one of the sector's greatest strengths as it enters its next phase of growth.