Bumper 2025 For Hotel Investment Predicted After £6.3B In Deals Last Year
The UK hotel investment market should see more diversified investors and strong international interest this year after rebounding to £6.3B in 2024, up 198% year-on-year and 31% above the 10-year average.
Driven by a sharp increase in portfolio deals, according to new data from Knight Frank, the increase follows three consecutive years of declining investment volumes. Overseas buyers accounted for 75% of total capital deployed, driven by portfolio transactions, which accounted for 57%, or £3.6B, of investment volumes.
Key deals included Landsec’s disposal of the 21-asset AccorInvest hotel portfolio to Ares Management for £400M, Starwood Capital Group’s £800M acquisition of 10 Radisson Edwardian Hotels, Blackstone’s £700M acquisition of 33 Village Leisure hotels from KSL Capital Partners, and the Abu Dhabi Investment Authority's disposal of 33 hotels operated by Marriott to KKR and Baupost Group.
A total of £1.2B was deployed in single-asset transactions in 2024, up 7% year-on-year. London accounted for 63% of single-asset activity, with just nine hotels across the UK regions transacting for more that £10M, due primarily to lack of availability, Knight Frank said.
The broker also pointed to a strong rise in fixed-income investment deals, which accounted for 26% of total UK hotel investment, driven by several institutions exiting the sector to meet redemption requirements, plus risk and environmental, social and governance criteria.
Hotel development transactions exceeded £500M in 2024 but remained below prepandemic levels because of high construction and financing costs, while overall activity continued to be focused on London, with £3.1B, half the total capital, deployed in the capital.
“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,” Knight Frank partner and Head of Hotel Agency Henry Jackson said in a statement.
“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.”
Separately, LyLo, part of EVT, has started the global expansion of its pod hotel concept, with London as the potential location of its first European property. Appointed as sole agent, P-Three said it is initially focused on potential sites in Southwark, although other central locations will be considered.
LyLo is looking for buildings of 15K SF to 50K SF suitable for transformation into a pod hotel, which could include office or retail conversion projects or basement space, the company said. Launched in 2022, LyLo is part of EVT, a major Australian operator of cinemas, hotels, restaurants and an alpine resort, with more than 80 hotels in Australia, New Zealand and Singapore.
