The UK hotel investment market has had a slower start to 2025, with a total of £1.59 billion transacted in the first half of the year, a significant drop from £3.9 billion in the same period in 2024. But if you thought the sharp year-on-year decline was the only story being told, think again. Look more closely and there are some positives to be found, namely around single asset transaction activity where deals totalled £1.35 billion in the first six months of the year.
Balance
James Greenslade, director – hotel capital markets at Savills notes that although this marks an 8.4 per cent increase year-on-year, it’s coming from a low base, particularly outside of London. However, he adds: “What we’re seeing is a return to what we would consider a more balanced market between portfolio and single assets.”
This was following a 2024 where transactions were weighted very heavily to portfolio activity, which made up about two-thirds of transactions. Although the £1.4 billion Dalata portfolio deal, Alchemy’s acquisition of hotel & spa group Barons Eden and Tristan Capital’s purchase of easyHotel’s €400 million portfolio grabbed headlines as some huge central London processes of £150 to £200m continue to progress, these were outliers, and the absence of more huge portfolio deals haven’t helped the overall numbers.
But with single asset deals standing 1.7 per cent above the 10-year H1 average of £1.33 billion, experts say we’re seeing a market that’s functioning in a far more normal way. However, as these deals are only slightly above the 10-year average, it’s clear that the market is far from robust.
Where and why?
On a less pessimistic note though, research highlights the shift towards individual hotel assets is a sign of renewed investor confidence.
“I think the deal volumes delivered last year in terms of portfolio deal volumes give some sense that the big market players are confident on hospitality and discretionary consumer spend,” Greenslade notes.
This positive sentiment may then have contributed to smaller scale retail investors and high net worth individuals returning to the market.
He adds: “In the face of all of the macro challenges that we've seen, performance has still been surprisingly robust, and the regions have performed well this year, which I think gives confidence.”
His statement comes as single asset deals in regional market continues to improve, albeit from a low base. According to Christie & Co’s Hotel Market Review 2025, regional UK markets saw £758 million transacted in the first half of the year.
These transactions included Schroders Capital’s £100 million purchase of the W Edinburgh which was the largest single asset hotel deal ever recorded in Edinburgh as well as the sale of the Ruby Stella by RE Capital to LaSalle for £48 million.
Savills notes the South West recorded £147 million in transactions, a 95 per cent increase compared to full year 2024, while the West Midlands saw £153 million, up 60 per cent over the same period. And while these dramatic percentage increases suggest a pretty challenged market the year prior, they highlight a growing interest in hotel investment outside of London and the South East. Notable transactions in the South West include the sale of the Pentire Hotel in Newquay, Cornwall, and the Invicta Hotel in Plymouth.
Greenslade notes: “It's not just that capital outside of London is now looking at just staycation markets or is just looking at gateway cities or is just looking at budget or economy - all of it is starting to move together.”
The players
Turning to market players, Christie & Co highlight a sharp rise in domestic investment, with American investment seeing a real decline. This is as Savills highlights new market entrants and in the UK’s regional market, a resurgence of overseas high net worth individuals.
“Last year saw a lot of activity by private equity, particularly from the US. This year, while there are still some big PE deals being done, there’s a greater spread of buyers in the market, aided by the greater liquidity in the debt market helping the hotel owner operators and the smaller groups and the individual owners transact,” Greenslade says.
This is as European investment interest strengthened - exemplified by Limestone Capital’s acquisition of the Nobu Shoreditch - and other overseas investment continues to grow.
“We're seeing a lot come from India at the moment, particularly new market entrants. For India, it’s conglomerates who are adding to their real estate portfolio with hotels in the UK.” He adds: “The Far East has always been and continues to be an important component of that overseas investor pool.”
Carine Bonnejean, managing director – hotels at Christie & Co notes: “The UK is maintaining its appeal as a ‘safe haven’ for investors by sitting outside of the EU, further strengthened by the perspective of a trade deal with the US. This is also reinforced by the weakened appeal of other real estate classes comparatively to hotels in recent years,” says Carine Bonnejean, managing director – hotels at Christie & Co.
The growing international interest in UK hotel assets is a reflection of the continued attractiveness of the UK as an investment destination, especially in the face of global uncertainty, from Brexit to Covid, world conflicts and tariff wars.
However, the years of uncertainty have led to an acceptance of a greater degree of risk in the market as investors realise decisions have to be made and cannot be put on hold.
“So I think there is possibly a greater appetite for risk generally, provided what can be dealt with from an asset management perspective is dealt with and any issues are handled as they arise,” Greenslade says.
What
In terms of the assets being transacted, the focus is shifting towards value-add opportunities. Investors are increasingly looking for undercapitalized properties or those with potential for repositioning through strategic investment or brand partnerships.
Greenslade emphasizes that value-add deals are a key theme in the market, as buyers look for opportunities to improve the quality and operational performance of assets.
“The real theme in the market, or what buyers are looking for is value add. There needs to be a story about how you move from A to B with an asset, Greenslade advises, adding “Also, it's markets that can demonstrate well rounded demand, lack of seasonality, good balance between leisure and corporate. Location remains key. The opportunity to reposition and the underlying quality of the asset or any latent liability is important.”
To the future
Looking ahead, Savills projects that the UK market could exceed the 10-year annual average of £4.85 billion in transactions. And while that figure stands below 2024 numbers, experts say this would mark a return to more normal market conditions.
“This is a return to what we would consider normal. As we accrue more of the transactional evidence that these transactions completing are bringing, it gives better vendor confidence to launch processes and it gives better buyer confidence when they're pricing assets,” Greenslade says.
He notes that that in itself, should be self-perpetuating in terms of unlocking deals.
Christie & Co adds: “Looking ahead to the second half of 2025, there is definitely some ‘catching up’ to do to reach the transaction volumes we saw last year. And whilst some portfolio deals are currently on the market/ongoing, such as Malmaison and Dalata, the majority of transactions this year are likely to be individual assets.”
While there are some encouraging signs, particularly with increased regional interest and a shift in buyer composition, the overall state of the market remains challenging. Maybe what we need is a few more big-ticket portfolio deals in the bag, surprising us and saving the day before the year ends.