Edinburgh hotels have experienced outstanding growth in occupancy and average daily rate (ADR) in recent years, resulting in revenue per available room in 2024 67.6% higher than 2019 according to CoStar; growth in 2024 alone was 12.6%.
Whilst growth slowed somewhat in 2025, this was common across the UK main city markets as geopolitical factors and the cost of living crisis continue to bite. Notably, performance in London stagnated in 2025 with RevPAR falling by 0.2%. RevPAR in Edinburgh increased by a very respectable 2.3% to £139.00, driven by ADR growth.
In fact, growth in Edinburgh has exceeded London since the Covid-19 pandemic and as a result, Edinburgh RevPAR in 2025 had increased to 88% of the London value, against 65% in 2019.
We’ve had a look at the main factors driving this exponential growth and started thinking about what might happen in 2026.
The exponential RevPAR growth from 2022 to 2025 was driven by both occupancy and ADR as the city recovered very rapidly following the pandemic.
First and foremost this has been about the growing global profile of the Edinburgh (and wider Scotland) brand, with the city increasingly becoming a must-visit trip of a lifetime destination for affluent inbound leisure tourists. Scotland’s inbound tourism sector has been booming in recent years and there is a very high propensity for visitors to factor in at least some time in the capital.
With very strong and significant frustrated demand for much of the year, operators have been able to increase room rates considerably; ADR in 2025 was 62.6% higher than in 2019, accounting for the vast majority of RevPAR growth.
However, supply dynamics have also impacted positively on performance:
- Edinburgh has not been immune to the significant slowing of new hotel development due to construction cost inflation and funding constraints; overall, supply increased by 8.7% from 2019 to 2025 compared with 16% in the four years to 2019. Demand growth from 2022 to 2025 far outstripped supply increases;
- The majority of recent openings have been in the luxury and upper upscale space including the W, Virgin Hotel, Resident Hotel and Hoxton, driving the overall ADR higher; in 2019 about 29% of supply fell into this CoStar category, increasing to 32% in 2025;
- The introduction of licensing legislation for the short-term let sector (Airbnb- type products) has resulted in a significant reduction in listings for this type of property, down by about 40% in 2025 compared with 2019; this in turn has resulted in greater demand for hotels and serviced apartments.
The result of these supply and demand dynamics is that there are undoubtedly substantial periods of (increasingly) frustrated demand in Edinburgh which results in very high room rates, but also benefits hotels in the surrounding areas, including Glasgow (2.7% RevPAR increase in 2025).
The outlook remains very positive but, we believe without the very large increases in ADR seen in recent years.
Demand looks set to continue to increase strongly with growth at Edinburgh Airport driven by new longer haul routes. 15.4m passengers in 2024 was a record year and growth in November 2025 YTD was 7.7%; the Airport anticipates reaching 20m passengers by 2030.
Glasgow Airport has also confirmed a number of new routes for 2026, which will also drive accommodation demand in Edinburgh.
The new supply pipeline however has begun to increase and is now significant with a number of new openings expected in 2026 (over 1,400 rooms according to CoStar, but some projects are likely to overrun). And it is likely that the decline in short-term let supply has now stabilised.
We believe it is highly likely that occupancy will remain very strong, in the mid-80s% across the year, but unlikely to go any higher than that due to demand troughs in the winter and Sundays that will persist.
Room rates however, following years of exponential growth may stabilise to an extent in 2026:
- Operators are not currently subject to the high levels of operating cost inflation seen in recent years, so there is less need to grow ADR to cover costs. That said, with business rates increasing significantly for many operators from April, cost pressures remain uncertain;
- The Visitor Levy, a charge of 5% of room rate will come into effect in July, and may impact the extent to which operators can increase rates, particularly in the periods of lower demand.
Overall, Edinburgh remains incredibly positive as a tourism and hotel market, and the UK destination where all operators want to be present. The very high performance growth experienced in the last few years is likely, in pour opinion to slow significantly in 2026 and beyond as new pressures emerge including supply growth and the Visitor Levy.
Get in touch for further details.
Andrew Renouf – 07584 186520
andrew@arhospitalityconsulting.co.uk
Photo by Kate Bielinski on Unsplash