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UK hotel investment soared by 198% to £6.3bn in 2024, driven by a sharp uptick in portfolio deals over the year. According to new data from Knight Frank, this figure is 31% above the 10-year average, following three consecutive years of declining investment volumes.
The rise was largely driven by portfolio transactions, which accounted for 57% (£3.6bn) of investment volumes and saw more than 20,000 hotel bedrooms acquired by private equity or overseas buyers, who accounted for more than three quarters (75%) of total capital deployed.
Standout transactions included Landsec’s disposal of the 21 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 Villlage Leisure hotels from KSL Capital Partners; and ADIA’s disposal of 33 hotels operated by Marriott to KKR and Baupost Group.
A total of £1.2bn 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 than £10m due to a relative lack of availability.
There was also a strong rise in fixed income investment deals, which accounted for 26% of total UK hotel investment. This has been driven by a number of institutions exiting the sector in order to meet redemption requirements and risk and ESG criteria.
Knight Frank said that ground rent deals also featured more strongly than in recent years, including simultaneous tri-partite deals whereby capital from the ground rent is used to finance the acquisition.
While hotel development transactions exceeded £500m in 2024, they remain down on pre-pandemic levels due to high construction and financing costs. However, there continues to be strong interest in repurposing older office and retail buildings as hotels.
This includes Criterion Capital’s acquisition of Edinburgh’s former Debenhams Store for £50m, and Whitbread having undertaken selective sale and leasebacks of some of its freehold assets to recycle capital into the business to secure sites in strong locations.
Overall, activity continued to be weighted towards London, with 50% (£3.1bn) of capital deployed into hotels in the city. Aside from portfolio deals, some of the largest hotels to change hands in 2024 included Six Senses London (£180m), The Standard (£185m), Hyatt Place London City East (£84m) and Motel One London Tower Hill (£56m).
According to Knight Frank, investor sentiment towards the hotel sector is expected to remain strong in 2025, with the asset class demonstrating “strong operational resilience and proven as a robust inflationary hedge”. An increased availability of debt should further support investment activity.
Henry Jackson, partner and head of Hotel Agency at Knight Frank, said: “We have seen a strong rebound in hotel investment activity in 2024 underpinned by robust operational performance, fierce demand from overseas private equity buyers and institutions selling assets due to redemptions.
“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. 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.”
