The UK hotel market has demonstrated remarkable resilience and growth in 2024, with luxury offerings expanding and major portfolio transactions making a strong return. According to Savills, total hotel investment for the year is forecasted to reach £5.8 billion, signaling a return to pre-pandemic activity levels last seen in 2019.
London remains the focal point of this resurgence, with investment volumes soaring by 91% year-on-year, underscoring renewed confidence in the sector. As we look ahead to 2025, several key trends are set to shape the market, from cross-border investment to the continued expansion of alternative hospitality sub-sectors.
Cross-Border Investment Rebounds
International investors are once again turning their attention to the UK hospitality sector. Savills highlights that cross-border buyers accounted for 20% of global commercial real estate transactions in the past year, with European investment levels exceeding 40%. While this remains below the mid-2010s peak of nearly 30%, it reflects the ongoing demand for prime UK assets.
Hotels continue to offer strong relative value and resilience, making them attractive for institutional and private equity investors. Trophy assets and larger portfolios remain particularly appealing to overseas buyers, with long-term value creation opportunities in a maturing market. As risk appetite grows, the sector is expected to see further international capital inflows.
M&A Momentum: Bigger is Better
Mergers and acquisitions within the hospitality industry surged in 2024, a trend set to continue into 2025. This renewed activity is driven by increased liquidity in the debt market, with lenders returning after a period of caution. While capital restrictions persist in isolated cases, non-bank lenders have been quick to capitalize on elevated interest rates and attractive yields.
Several high-profile transactions illustrate the sector’s growing appetite for scale:
- Stepstone and Proprium’s acquisition of the A&O platform
- Edwardian Hotels’ sale to Starwood Capital
- KKR’s £900 million purchase of a Marriott portfolio
- Proprium’s €1.25 billion exit from Motel One
With large assets like Easy Hotels currently on the market for €425 million, industry consolidation is expected to accelerate further. The outlook suggests that scale will continue to be a defining factor in shaping the competitive landscape.
The Rise of Serviced Apartments & Alternative Concepts
One of the fastest-growing sub-sectors in hospitality is serviced apartments and aparthotels, which are proving highly attractive to both investors and travellers. London is on track to become Europe’s largest serviced apartment market by 2028, with a 21% increase in supply projected.
Investor confidence in this space is reflected in Ando Living’s recent acquisition of City Apartments, along with other high-profile deals in key gateway cities. As international arrivals continue to rise, undersupplied markets are set to benefit from strong demand and robust returns.
Office-to-Hotel Conversions: A Growing Trend
Another major shift in the sector is the increasing number of office-to-hotel conversions. Over £400 million worth of office buildings have been repurposed into hotels in 2024 alone, with the trend showing no signs of slowing.
London’s flexible planning policies, particularly in the City of London, have played a key role in encouraging these conversions. A prime example is 68 Lombard Street, a former office building that drew a range of proposals, including serviced apartments, boutique lifestyle hotels, and micro-room concepts. This adaptive reuse model, commonly seen in the US, is helping to revitalize urban spaces while addressing the growing demand for hospitality offerings.
Looking Ahead: A Dynamic and Evolving Market
The UK hotel market enters 2025 with strong fundamentals and sustained international appeal. However, margin protection will be key, particularly in light of evolving economic conditions and operational cost pressures. Hoteliers will need to balance service offerings and staffing models carefully to optimize profitability.
With cross-border investment on the rise, consolidation gaining momentum, and alternative hospitality models flourishing, the sector remains dynamic and full of opportunity. As Savills notes, the ability to adapt to shifting market trends will be crucial in ensuring long-term success in this evolving landscape.
Sources: Savills, 2025