UK hotels still ‘in high demand for investors’

The number of deals in the UK hotel sector tripled last year due to strong investor interest.

There were approximately £6.4b worth of transactions last year which marked a return to 2018/19 levels, according to Christie & Co’s Business Outlook report.

This was largely linked to portfolio deals such as Starwood Capital buying 10 Radisson Edwardian hotels, Village Hotels being sold to Blackstone, and Travelodge acquiring 66 freehold hotels from its largest landloard LXi REIT. Around 40% of the transactions took place in London.

Christie & Co itself saw an 11% increase in deals agreed and a 20% rise in completions in 2024 compared to 2023.

The property firm said the European hotel sector was outperforming the wider commercial real estate market and attracting investors at all levels.

European hotel transactions in 2024 were up 50% compared to 2023, on a par with pre-pandemic levels. Just over a third (36%) of this was made up of the UK market, followed by Spain and France.

In its outlook for 2025, the property firm said hotels were likely to see their profits hit by cost pressures announced in the autumn Budget and rising payroll, pension and business rates.

It predicted this could lead to a possible uptick in distressed hotels coming to the market due to rising costs.

However, it said the outlook for the sector “remains positive” into the next year.

Carine Bonnejean, managing director of hotels at Christie & Co, said: “Whilst there is continued uncertainty due to geopolitical risks across the globe and the recent Budget announcements for the UK in particular, hotels remain in high demand for investors.

“2024 saw a significant comeback of the UK transactional market which boosted European deal volumes. Whilst it is unlikely that similar levels of portfolio activity will be replicated in 2025, pipelines are way ahead of same time last year, and single assets and small portfolios are being prepped for market.

“Some uncertainty is unavoidable as proven in recent years, but hotels are definitely an attractive investment option for all investor types.”