Hotel & Leisure Construction: Major Starts Mask an Uneven Market

The latest Glenigan data on hotel & leisure construction presents a sector defined by contrasts.

While project starts have risen sharply on paper, much of this growth is driven by a small number of high-value schemes. In contrast, detailed planning approvals and main contract awards have both declined significantly, raising questions about the sustainability of current momentum.

Growth in Project Starts Driven by Major Developments

Project starts in the hotel and leisure sector increased by 102% year-on-year, with growth also evident against the previous quarter. However, this headline figure is largely attributed to three major schemes, with underlying project starts (under £100 million) falling compared to both the previous quarter and the same period last year.

Sub-sector Performance: Broad but Uneven Growth

Most parts of the leisure construction sector experienced year-on-year growth. The strongest performers included:

• Hotels & guest houses: Increased by 162% to £540 million, representing 36% of all starts.
• Other hotel & leisure: Up 95%, contributing roughly one-third of total sector starts.
• Cinemas & theatres: Grew by 233%, now accounting for 13% of the sector.

Source: Glenigan

This distribution indicates a degree of resilience across sub-sectors, including those linked to discretionary spending, such as entertainment venues.

Regional Activity: London and the North East Dominate

Regionally, performance was mixed. Half of all UK regions saw an increase in project starts, with London and the North East leading the way:

• London: Starts totalled £479 million, nearly four times higher than a year earlier, largely due to the 380 Kensington High Street Hotel development (Pictured. Glenigan ID: 23137089).
• The North East: Grew more than six fold to £375 million, mainly driven by the Sage International Conference Centre (Glenigan ID: 06021815).

Despite this, detailed planning approvals declined by 31% year-on-year, pointing to a reduction in future development activity:

• London: Down 61% to £163 million.
• The South East: Fell 51% to £128 million.

Contract Awards Reflect Investor Caution

Main contract awards fell by 40% compared to the same period last year, suggesting a cautious outlook from developers amid rising costs and ongoing economic uncertainty. The decline in contract awards follows a pattern seen in planning approvals and may signal reduced output in the coming quarters.

This reduction may also reflect pressures within the hospitality and leisure sectors, including labour shortages and higher input costs.

Contractor Activity in Focus

Despite the downturn in forward indicators, several contractors continue to perform strongly in the sector.

Hotel & Leisure Contractors League Tables May 2024 to April 2025

Source: Glenigan

Market Summary

While the hotel and leisure construction sector recorded a significant increase in project starts, the figures are heavily skewed by a small number of major projects. Sub-sector growth remains broad, with particularly strong activity in hotels, cinemas, and other leisure facilities.

Regionally, London and the North East led the way in new project starts, but the decline in planning approvals and contract awards across most regions indicates that market conditions remain challenging. Rising costs and wider economic pressures are likely to continue influencing investor decisions and overall sector performance in the short to medium term.

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