Hotels, along with rented residential and sheds, were supposed to hedge against the uncertainties and inflation of the post-pandemic UK property market, chased by private equity funds and priced optimistically.

Now it seems like one element of that triple whammy of safe bets is slightly less safe than it seemed.

The explanation lies in repricing in the hotel sector to take account of lower visitor numbers, in some cases still 25% down on pre-pandemic levels, and the sluggish return of business travel. While the number of UK long-distance train services is back to normal pre-pandemic levels, passenger numbers are not — a key indicator of business travel activity.

Together these factors have conspired to undermine confidence while increased supply of hotel beds and a cost of living crisis have undermined hotel owners' bargaining power.

The latest figures (from November 2022) show UK outbound trips totalled around 66 million, according to the Office for National Statistics, equivalent to 75% of trips made in 2019. Destinations that saw some of the largest increases to room rates in 2021 are now being repriced.

The most abrupt repricing is to be found in domestic vacation hot spots but analysts fear the contagion will spread to urban hotels.

Conspicuous repricing is underway in the south coast resort of Bournemouth, according to data from STR, a CoStar Group company. Room rates rose sharply in the year to February 2022, leaping by 40%. The year to February 2023 told a different story, with room rates falling back by 12% as the post-pandemic surge in domestic hospitality gives way to a less exuberant new normal.

Harrogate hotels have been on a similar journey, rising by 24% in the year to February 2022, then falling by 13% in the year to February 2023.

The anxiety is that urban destinations, which are behind the curve, will begin to see a similar fall-off in pricing as the year progresses, and occupancy trends become clearer.

Analysts said rate growth seems to be decelerating but that prices remain ahead of 2019 levels.

Research by Global Data showed a similar slide in investor appetite. Travel and tourism sector deal activity was down 41% year-on-year in Q1 2023, a total of 179 deals compared to 302 in the same period in 2022. All parts of the world were affected, except South America where deal volumes nudged down by only 10%.

For now the hotel sector seems unperturbed. Travelodge has identified that it can expand its UK hotel network with a further 300 target locations for new hotels, which could represent an investment of around £3B.

Investors like Fattall Group have maintained a steady pace. In February the Beirut-based investor bought Brighton's 201-room Grand Hotel for £60M, having recently completed the purchase of the Dilly Hotel, Piccadilly, London W1, along with nine hotels in Austria, Salzburg and Linz.

"The overall trend is positive as prices remain ahead of 2019 levels, signalling ongoing demand for domestic leisure-led travel,” CoStar Director of Hospitality Analytics Cristina Balekjian said.

“We have yet to see how Michael Gove’s proposed regulation of holiday lets will affect the supply of available holiday properties and the implications that will have for the hospitality sector, possibly leading to an increase in rates due to availability constraints in certain markets.”