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For the second consecutive year, senior hospitality figures and investors have ranked London as the most attractive European city for hotel investment in the year ahead, according to a survey from Deloitte.
Paris and Madrid moved up the list to second and third respectively while Amsterdam fell to fourth place and Porto, Portugal entered the ranking for the first time in 12th place.
Edinburgh retained its spot as the most attractive city for UK regional hotel investment for the fourth consecutive year running, with over half (54%) of respondents ranking it first.
This was followed by Oxford (25%) in second place and Manchester (22%) in third place, while Birmingham moved three places up the ranking to sit as the fifth most attractive UK city for investment in 2025.
Three out of four (72%) hospitality executives say they are optimistic about the long-term future of the UK hotel market.
However, there has been a five percentage-point fall in those expecting the UK hotel sector to materially grow over the next five years (59% in 2024 vs 64% in 2023).
Respondents once again cited rising costs (79%), labour challenges (77%), and interest rates (71%) as the top three key risks threatening growth to the hotel industry.
Meanwhile, there is growing concern around the immediate risks of overtourism.
Close to one in three executives (28%) recognise overtourism, or local resentment towards tourists, as a risk, recording the biggest jump year-on-year in the survey – up nine places overall.
A surge in M&A activity is expected in the year ahead with most executives (70%) anticipating an increased level of competition for hotel acquisitions in 2025, and one in two businesses (54%) saying they plan more acquisitions in the year ahead.
Leila Jiwnani, head of hospitality and leisure advisory at Deloitte, said: “London’s resilience as an attractive European destination city for international travel as well as a gateway for business is evident. Once again London shines brightest as hotel investors look to secure reliable assets and build portfolios. Edinburgh continues to sit steadfast at the top of our UK ranking as an attractive, safe and growth investment opportunity as a popular tourist destination.
“M&A activity is picking up and hotels remain by far the most popular investment class, but we’ve also identified the increasing attractiveness of hostels as an investment asset across Europe in the year ahead too. We also expect investors to favour the luxury end of the market in line with the growth in hotels offering premium experiences, but these preferred strategies risk leaving the mid-range hotels out in the cold.”
