The events of 2020 have triggered a collective urge for indulgence and escapism. 74% of people who would consider staying in a hotel in the coming months agree that ‘Booking a luxury hotel to escape everything appeals to me’.

The roll-out of the vaccination programme will help to release pent-up demand for leisure travel among UK consumers. However, inbound travel will be slower to bounce back. Hotel revenues slumped overall by an estimated 70% in 2020 and are not expected to return to pre-COVID levels until 2025.

A significant proportion of business guests may never return in a post-COVID era of corporate cost-cutting and virtual conferencing. Hotels will need to pivot further towards the leisure market. The pandemic is also likely to lead to diminished hotel supply. This is likely to intensify the rising competitive threat to hotels from Airbnb.

Experiences in general and regular mini-breaks in particular have become a high priority for consumers. These lifestyle trends will bolster renewed growth and continue to drive innovation in the hotel industry in the years ahead.

• The impact of COVID-19 on hotels – including domestic and inbound markets.

• Hotel usage by consumers in Great Britain over the past three years – budget, mid-market and luxury.

• Consumer perceptions of leading hotel brands versus Airbnb.

• Consumer intentions, preferences and attitudes towards staying in hotels while COVID-19 is still a threat.

• Company and product trends during the pandemic and the legacy of COVID-19 for hotels.

COVID-19: market context (created 4 December, 2020)

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. A full UK lockdown requiring people to stay at home except for essential shopping, exercise and work followed on 23 March. Relaxations to lockdown rules were announced in the week of 23 May, including the gradual reopening of non-essential retailers, and increased opportunities for social interaction across households.

Pubs, restaurants, hotels and other accommodation, as well as many leisure facilities and tourist attractions, were allowed to reopen from 4 July, 2020, with social distancing and other COVID-secure health & safety requirements in place. Restrictions on overseas travel began to be lifted from 10 July, 2020, with quarantine requirements later imposed on travellers entering or returning to the UK from most destinations.

On 8 July, 2020, the government announced that it would temporarily reduce VAT for hotels along with other hospitality and accommodation providers from 20% to 5%. This was initially planned to last until 12 January, 2021. On 24 September, the rate cut was extended to 31 March, 2021.

On 14 October, 2020, following a rising ‘second wave’ of infections, the government introduced a three-tier system of restrictions across England, with ‘Medium’, ‘High’ and ‘Very High’ alert levels. Those in the ‘Very High’ tier were advised to avoid travelling outside of their area.

Between 5 November, 2020 and 1 December, an England-wide lockdown was introduced. All leisure and hospitality businesses, including hotels and other accommodation, were closed to all guests apart ‘from those who have to travel for work purposes and for a limited number of other exemptions’.

On 2 December, 2020, the three-tier system was reintroduced across England. In tiers 1 and 2 (‘Medium’ and ‘High’ alert levels), hotels and other accommodation businesses are permitted to open for anyone travelling from within those regions, or from other regions which are also in either tier 1 or 2. Hotels in tier 3 (‘Very High’ alert level) remain closed (with a few exceptions such as ‘those who use these venues as their main residence, and those requiring the venues where it is reasonably necessary for work or education and training’). Those resident in tier 3 areas are advised not to travel outside of their area.

The devolved governments in Scotland, Wales and Northern Ireland have pursued divergent pathways since the first UK-wide lockdown began to ease. As of 4 December, 2020:

Scotland operates a five-tier system of restrictions. In areas with ‘Protection levels’ 0, 1 and 2, hotels are permitted to open fully. In level 3 areas, hotels are permitted to open but people are not allowed to enter or leave these areas to stay elsewhere. In level 4 areas, hotels are closed except for essential purposes (including work). Those living in Scotland are not permitted to travel to other regions of the UK for non-essential purposes. Those living in other regions of the UK are not permitted to travel to Scotland unless they have ‘a reasonable excuse’.

There are no restrictions on travel within Wales. Travel to and from areas of the UK with the highest risk classifications is prohibited (tier 3 in England, levels 3 and 4 in Scotland, and the whole of Northern Ireland). People are also ‘strongly advised’ not to travel to other lower-tier areas of the UK.

Northern Ireland entered a two-week ‘circuit-breaker’ lockdown (27 November-11 December). All hotels were closed except for essential purposes.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021, and 6.6% in 2022. GDP isn’t expected to return to pre-COVID levels until the fourth quarter of 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021. The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

From the start of the outbreak, we have made the assumption that an effective vaccine would not be widely available until well into 2021. On 9 November, Pfizer and BioNTech announced highly encouraging results from trials of their vaccine, followed by similarly positive results from Monderna. This means that a vaccination programme may be brought forward, but a full rollout will take many months, meaning that Mintel is still making the assumption that we will be living with COVID for some time to come. In the meantime there will be continued disruption to both domestic and global markets, including domestic and inbound travel. Continuing restrictions are expected at local and regional/national levels, and social distancing will remain the norm until the pandemic has been resolved.

For the purposes of this Report, Mintel has used the following definition: hotel stays or trips refer to overnight visits of one night or more, staying in UK hotels for leisure, business, visiting friends and relatives (VFR) and other miscellaneous purposes.

The market size, segmentation and forecast sections cover both domestic UK and inbound visitors staying in hotels. The consumer and brand research sections focus on the UK domestic market.

Data on the size of the domestic market is for Great Britain rather than the United Kingdom (ie Northern Ireland is not included), sourced from VisitBritain’s GBTS (Great Britain Tourism Survey). Data for the inbound market is for the UK and sourced from the Office for National Statistics (ONS)’ International Passenger Survey (IPS).