The Airbnb Surge in the UK — What It Means for Hotels

In recent years, the UK has witnessed a sharp uptick in Airbnb listings and short-term rentals, a trend that has reshaped parts of the accommodation landscape. For travellers, there’s more variety, often at better prices; for traditional hotels, the rise brings both challenge and opportunity. This article explores how the Airbnb boom is evolving in Britain, and what it means for hoteliers.

The Growth of Airbnb in the UK

A recent economic analysis found that stays via Airbnb contributed nearly £2.9 billion in economic benefit to UK communities as tourism recovered after the worst of the pandemic, supporting over 107,000 jobs.

Airbnb reports that its activity generated a gross value added (GVA) of £5.7 billion in 2023, supporting over 75,000 jobs across the country.

The gains are not just concentrated in London — they are spreading into rural and peripheral regions, helping local businesses (restaurants, shops, services).

Drivers Behind the Surge

Several factors are driving the rise of short-term rentals via platforms like Airbnb in the UK:

1. Traveller preferences shifting: Many travellers increasingly prefer more unique, local, homelike experiences over generic hotel stays. Amenities such as kitchens, more space, and privacy are strong pull factors.

2. Bleisure / Remote work: With remote/hybrid working more common, the distinction between business and leisure travel is blurring (“bleisure”). Longer stays and more flexible schedules favour short-term lets.

3. Event-driven demand: Big events (e.g. conferences, festivals, major sporting or political gatherings) push up demand for accommodation, and Airbnb can flex capacity more quickly. Local residents listing properties temporarily can help absorb demand peaks.

4. Economic pressures & income opportunities: For many homeowners, becoming a host is a way to earn extra income (sometimes essential), especially in cost-of-living crunches. It helps offset bills, maintenance, etc.

Impacts on the Hotel Industry

This boom isn’t without consequences for traditional hotels. The effects vary by segment (luxury vs budget), location (big city vs rural/tourist town), and type (chain vs independent). Here are the main ways Airbnb’s rise is affecting hotels:

1. Increased Competition & Pricing Pressure

With more supply from short-term rentals, hotels are under pressure to lower Average Daily Rates (ADRs) or offer more flexible pricing. Some hotels are being forced to compete with properties that have lower overheads.

In areas with very high Airbnb density, hotels may see occupancy slip or have to discount heavily during what would otherwise be “shoulder” or “off” seasons.

2. Loss of Market Share in Certain Segments

Leisure travellers, families, or groups who want whole-homes or more space may increasingly choose Airbnb over hotels. Budget hotels and small, boutique hotels feel this most.

Hotels that rely on short stays, walk-in business, or tourist footfall may be more exposed than business-oriented or luxury hotels.

3. Regulatory & Tax Disparities

Hotels are often subject to stricter standards: safety, accessibility, business rates, planning permissions etc. Some argue that short-term rental operators do not always face the same regulatory burdens. This can make the playing field uneven.

Business rates is a recurring issue: hotel operators in some markets see that Airbnb-style hosts escape charges or pay less, which some in the hotel trade regard as unfair.

4. Changing Consumer Expectations

Hotels are having to rethink what guests want: more “local” experience, more flexible amenities, perhaps more domestic kitchens or communal spaces, or more personalised services.

Also, cleanliness, trust, and consistency remain advantages for hotels, but Airbnb-style hosts are pushing improvements here too.

5. Potential for Collaboration / Adaptation

Some hotels are adapting by offering alternative products (e.g. serviced apartments, extended stay options) to better compete with the flexibility of Airbnb.

Others may partner with local hosts or create hybrid models.

Challenges for Airbnb & Regulation

While Airbnb’s growth brings economic gain, it also raises issues that indirectly affect hotels as well as communities:

Housing affordability / supply: In some places, converting dwellings to short-term lets reduces availability for long-term residents and can push up rents. This has political and regulatory consequences.

Local community friction & planning: Noise, turnover, wear and tear, impact on local services are cited as problems in areas with many short-term lets. Council rules for licensing etc are being tightened in many places.

Regulatory uncertainty: Because regulation is often localised, with varying planning rules, licensing, registration, there is unpredictability. For hotels, this complicates competitive strategy and investing.

What Hotels Should Do: Strategic Responses

To stay competitive (and in some markets, to thrive), hotels may need to:

Differentiate: Emphasise what hotels still do best — consistency, comfort, service, amenities, safety, loyalty programmes etc.

Flexibility & experience: Offer more flexible booking, better cancellation policies, more local / authentic experiences, perhaps partnerships with local attractions.

Cost management and innovation: Streamline operations, invest in technology (e.g. check-in automation, smart systems) to improve margins without sacrificing guest satisfaction.

Regulatory engagement: Work with local authorities to ensure fair regulations for all accommodation providers, and to influence policies so that short-term letting doesn’t create unfair competition.

Targeted marketing: Identify guest segments less attracted to Airbnb (business travellers, luxury travellers, groups) and tailor offerings accordingly.

Looking Ahead

The Airbnb trend is unlikely to reverse; if anything, it’s entering a more mature phase in the UK. But growth may be tempered by:

Increased regulation (licensing, limits on nights let, registration, business rates etc).

Rising costs for hosts (energy, maintenance, insurance) which may erode some of their margin advantages.

Consumer shifts—if travellers begin to value trust, hygiene, consistency more (post-pandemic), hotels regain ground in some sectors.

For hotels that are willing to adapt, innovate and emphasize their core strengths, the evolving landscape offers both risks and opportunities. For those that don’t, the threat is real, especially in markets with heavy tourism or where Airbnb density is high.

The Airbnb boom in the UK has brought clear benefits: more choices for travellers, income for hosts, economic stimulus for local communities. But for the hotel industry, it’s a disruptive force — one that challenges pricing norms, regulatory fairness, and traditional operational models.

Hotels can’t view Airbnb simply as a competitor to resist; many elements of its appeal are here to stay. By embracing adaptability, focusing on guest experience, and engaging proactively with regulators, hotels can carve out a sustainable path forward in a reshaped hospitality ecosystem.

RIC Hospitality Consultants - UK/EU