UK hotel investment on the rise

INTERNATIONAL REPORT — Hotel investment in the U.K. surged by 198% year-over-year to approximately £6.3 billion in 2024, according to a new report from Knight Frank.

This increase was primarily driven by a significant rise in portfolio deals, marking a return to pre-COVID investment levels. The 2024 total is also 31% above the 10-year average, following three consecutive years of declining investment volumes. Notably, overseas buyers comprised over three-quarters of the total capital deployed.

The growth in activity was largely fueled by portfolio transactions, which represented 57% (£3.6 billion) of the total investment volumes. In total, more than 20,000 hotel rooms were acquired by private equity firms or overseas buyers. Key transactions included Landsec’s sale of the 21-hotel AccorInvest portfolio to Ares Management for £400 million, Starwood Capital Group’s £800 million acquisition of 10 Radisson Edwardian Hotels, Blackstone’s £700 million purchase of 33 Village Leisure hotels from KSL Capital Partners, and ADIA’s sale of 33 Marriott-operated hotels to KKR and Baupost Group.

As U.K. GDP growth accelerates, investor sentiment toward the sector will remain strong. This asset class has shown robust operational resilience and is considered a solid hedge against inflation.

“While we anticipate a consistent flow of portfolio transactions, we expect an improving balance, leading to greater momentum and opportunities for single asset deals,” said Henry Jackson, partner and head of the hotel agency at Knight Frank. “We continue to see strong demand from investors for well-located assets that are performing well and fit strategically within their existing portfolios. Attractive, under-invested assets will likely become more prominent as borrowing costs decline. Capital from private equity is expected to continue dominating, but we foresee an increase in diversified capital being deployed in the sector by 2025.”

In 2024, London recorded £3.1 billion in investment, capturing a 50% share of total activity. Approximately £1.2 billion was invested in single assets throughout the U.K., reflecting a 7% increase over 2023 levels. London’s share of total single-asset activity was 63%, highlighting the limited number of substantial single-asset transactions in the regions of the U.K.

Hotel development transactions are estimated to have exceeded £500 million in 2024, representing 8% of the total U.K. hotel investment. Despite rising costs, trading has remained strong in most markets, with income levels recovering to acceptable post-pandemic standards.

Capital has aggressively pursued opportunistic hotel deals throughout 2024, with the U.K. remaining highly attractive to overseas investors, who accounted for £4.7 billion of the total annual investment in the sector. Private equity originating from abroad contributed more than half of this total, amounting to approximately £2.6 billion. The most active capital source was the U.S., contributing over £3.8 billion to the U.K. hotel sector.