Hotel investors bet on London over Paris or Madrid

London has been named the most attractive European city for hotel investment for the second consecutive year.

Deloitte surveyed 100 senior hospitality leaders, owners, lenders, developers and investors between 7 August and 17 September this year.

The UK capital was named as the top destination for investment, followed by Paris, Madrid and Amsterdam, while Porto entered the ranking for the first time in 12th place.

Meanwhile, Edinburgh retained its position as the most attractive city for UK regional hotel investment for the fourth consecutive year, with over half (54%) or respondents placing the Scottish capital first.

This was followed closely by Oxford (25%) in second place, and Manchester (22%) in third.

Leila Jiwnani, head of hospitality & leisure advisory at Deloitte, said: “London’s resilience as an attractive European destination city for international travel as well as a gateway for business is evident. Once again London shines brightest as hotel investors look to secure reliable assets and build portfolios.

“Edinburgh continues to sit steadfast at the top of our UK ranking as an attractive, safe and growth investment opportunity as a popular tourist destination.”

Nearly three quarters (72%) of survey respondents remained optimistic about the long-term future of the UK hotel market, though hospitality executives said rising costs (79%), labour challenges (77%) and interest rates (71%) posed a challenge to the sector.

Close to one in three executives (28%) said overtourism was a growing concern, while the majority (88%) expect managing cashflow to be a top priority over the next 12 months.

Some 70% anticipate a surge in mergers and acquisitions activity into 2025, with one in two businesses (54%) saying they plan on acquiring more sites in the year ahead.

The most attractive hotel segment for investment was upper upscale (24%), followed by luxury (22%) and economy (17%) brands.

Jiwnani added, “M&A activity is picking up and hotels remain by far the most popular investment class, but we’ve also identified the increasing attractiveness of hostels as an investment asset across Europe in the year ahead too.

"We also expect investors to favour the luxury end of the market in line with the growth in hotels offering premium experiences, but these preferred strategies risk leaving the mid-range hotels out in the cold." 

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