UK hotel investment transactions clear £6bn in 2024, CoStar finds

The value of UK hotel investment transactions exceeded £6bn in 2024, representing a 133% increase over the previous year and the highest since 2019, according to data from CoStar.

This comes at a time when overall investment in commercial property slumped and emphasised the growing appeal of operational real estate and leisure-focused investments.

Portfolios amounting to over £200m accounted for over 70% of the total hotel investment volumes, while monies were mostly put into London, as the capital remains an attractive proposition.

Single-asset hotel deals above £25m and outside of the capital have been harder to come by, with stakeholders across the industry citing a pricing misalignment.

This has led to sellers holding on to their assets until they feel the time is right as not to take a hit on their valuation and sales proceeds.

Although largely driven by big portfolio deals, with private equity players underpinning activity, this signals a shift in capital markets and a promising outlook for 2025, when interest rates are expected to fall further.

Furthermore, hotel investment as a proportion of investment in offices shot up to 60% more than double the 10-year average as investors turned away from offices.

In contrast there were no City of London office sales of over £100m throughout the year for the first time in history, further underlining challenges within a sector.

Rising office vacancies and negative sentiment, particularly for lower-graded assets, deterred many buyers away from offices, resulting in capital deployment into other asset types.

CoStar stated that while 2025 may not witness large hotel portfolio deals such as those seen in the past year, stakeholders expect that in the upcoming months, with falling interest rates, liquidity is likely to improve, and the price gap between buyers and sellers could possibly narrow too.