The United Kingdom government has revealed its summer Spending Review, and a notable inclusion for hoteliers is the government plans to end its subsidies to house asylum seekers in hotels in 2029.
More than 200 hotels in the U.K. have been used to house asylum seekers, and when the government contracts end, those hotels will likely require major renovations through property improvement plans before they are returned to the U.K.'s total hotel supply.
As of October 2024, 225 hotels in the U.K. were being used to house asylum seekers, according to a report from the Independent Chief Inspector of Borders & Immigration. That number peaked in November 2023 at 401 hotels.
The Home Office — the government ministry responsible for handling accommodations for asylum seekers — spent approximately £2.28 billion ($3.08 billion) on hotels for asylum seekers in a 12-month period across 2022 and 2023, according to a January report issued by the House of Lords Library. The Home Office predicted it would spend an estimated £3.1 billion for the next 12-month period. As of Sept. 30, 2024, 109,024 people seeking asylum support were housed in hotels, down from 123,758 in September 2023.
According to charity Refugee Council, 32,345 asylum seekers were given hotel accommodations in the year ending March 2025, which is a 15% decline from the end of 2024 and a 42% decrease from the peak of 56,042 asylum seekers in hotels in September 2023.
The government does use hotel rooms to house British and other legal residents, not just asylum seekers. Immigration often ranks as the most pertinent political concern for U.K. voters.
In November 2024, Angela Eagle, minister for border security and asylum, said the U.K. government remains “absolutely committed to ending the use of hotels for asylum seekers and continue(s) to identify a range of accommodation options to minimize the use of hotels and ensure better use of public money, while maintaining sufficient accommodation to meet demand.”
U.K. Chancellor of the Exchequer Rachel Reeves — the author of the June 11 Spending Review — said the government was committed to ending “the costly use of hotels to house asylum seekers” and cutting “the asylum backlog, [to] hear more appeal cases and return people who have no right to be here.”
She claimed such a policy would save “the taxpayer £1 billion per year.”
Third-party administration
The government’s Home Office has contracted companies, including Clearsprings Ready Homes, Mears and Serco, to house and manager asylum seekers. These firms work with hotel managers and government officials to accommodate those seeking asylum as well as other people with housing needs.
Before the onset of COVID-19, several companies housed asylum seekers in purpose-built accommodation centers, but the pandemic required occupants to have their own spaces for health reasons. That is when hotels became the go-to option for such accommodation, a process that only now is beginning to be wound up with several of these firms already having exited the space.
The government will now have to find alternative ways of accommodating people, possibly via shared room occupancy or a return to purpose-built centers.
While the government's intent to end its asylum hotel program is noteworthy, it can't come soon enough, said Enver Solomon, CEO of Refugee Council.
“Asylum hotels have become a flashpoint for community tensions and cost billions to the taxpayer, so ending their use is good for refugees, the taxpayer and communities. The deadline of 2029 feels far away, and we urge government to make it happen before then,” Solomon said.
Solomon further stressed the need for better community acclimation programs for U.K. asylum seekers in place of hotel accommodations.
“We need to see the men, women and children who arrive in Britain in search of safety being housed within our communities, not isolated in remote hotels,” he said. "Not only is this far cheaper, but it also means that people can actually integrate into British life, contribute and play their part in our country. This is positive for them but also for local communities. Government must urgently reform the asylum accommodation system to enable councils to deliver these vital services.”
The Independent Chief Inspector of Borders & Immigration report said in place of using hotel rooms, “contingency accommodation and … use of alternative sites such as surplus military facilities and former student halls to create 10,000 new bedspaces initially [by June 2024], with more to be planned, 'at half the cost of hotels' … clearly, the latter, had not been achieved with the early sites.”
Several hoteliers that have or are housing asylum seekers in their hotels were approached for comment, but all declined to be put on record or did not respond to CoStar News Hotels.
More pressing worries
Kate Nicholls, CEO of UKHospitality — the country's principal hospitality membership organization — said increased spending on infrastructure and transportation in regional U.K. markets should benefit the hotel industry. But there wasn't much else in the Spending Review that would ease the pressures on hoteliers, including tax breaks for hospitality businesses.
“It remains the case that the overwhelming challenge holding back hospitality from meeting its potential is the current tax burden imposed upon it. … The business rates reform being finalized this autumn will be a critical element of that, and there needs to be the maximum level of discount applied to hospitality businesses,” Nicholls said.