Overseas buyers drove surge in UK hotel investment in 2024

Overseas and private equity buyers were among the key drivers of a significant rebound in UK hotel investment in 2024, according to Knight Frank.

The global property advisor reported investment increasing to £6.3bn in 2024, driven by a “sharp uptick in portfolio deals”.

The 2024 total increased 198% year-on-year and 31% above the ten-year average, returning to 2019 levels.

Overseas buyers accounted for more than 74% of activity.

Portfolio transactions accounted for 57% (£3.6bn) of investment volumes and saw more than 20,000 hotel bedrooms acquired by private equity or overseas buyers.

Knight Frank pointed to significant transactions including Landsec’s disposal of the 21 AccorInvest hotel portfolio to Ares Management for £400m (for which Knight Frank acted for the vendor); Starwood Capital Group’s £800m acquisition of 10 Radisson Edwardian Hotels; Blackstone’s £700m acquisition of 33 Villlage Leisure hotels from KSL Capital Partners; and ADIA’s disposal of 33 hotels operated by Marriott to KKR and Baupost Group.

A total of £1.2 billion was accounted in single asset transaction in 2024, up 7% year-on-year.

Half of transactions, representing £3.1bn, were London hotels, including Six Senses London (£180m), the Standard (£185m), Hyatt Place London City East (£84m) and Motel One London Tower Hill (£56m).

London accounted for 63% of single asset activity, with just nine hotels across the UK regions transacting for more that £10m due to a relative lack of availability.

Hotel development transactions exceeded £500 million in 2024 but remain down on pre-pandemic levels due to high construction and financing costs.

Knight Frank said there continues to be a strong interest in repurposing older office and retail buildings as hotels, including Criterion Capital’s acquisition of Edinburgh’s former Debenhams Store for £50m.

 Henry Jackson, partner and head of hotel agency at Knight Frank, said: “We have seen a strong rebound in hotel investment activity in 2024 underpinned by robust operational performance, fierce demand from overseas private equity buyers and institutions selling assets due to redemptions.

“Whilst the steady flow of portfolio transactions is likely to continue, we expect the normal market equilibrium to return in 2025, with greater momentum and opportunity for single asset deals.

“Capital from private equity is expected to continue to dominate, but we anticipate a greater volume of diversified capital to be deployed into the sector in 2025, particularly as the cost of borrowing reduces.”

The property advisor expects investor sentiment to remain strong in 2025.