UK hotel investment set for strong H2 after slow start to 2025

UK hotel transaction volumes reached approximately £1.59bn in the first half of 2025, a slower start than the previous year, but market activity remained encouraging, with signs pointing to a stronger second half, according to data from Savills.

These muted levels of transactions in the first half were expected following an exceptionally high volume of portfolio transactions in early 2024.

Single asset transactions totalled £1.35bn in H1 2025, marking an 8.4% year-on-year increase and standing 1.7% above the 10-year H1 average of £1.33bn. Savills attributed this growth to a shift in investor focus and increased confidence in individual hotel assets.

The largest single asset transaction during the period was Nuveen Real Estate’s sale of the W Hotel in Edinburgh, to Schroders Capital for over £100m.

Savills advised on the sale, which is the largest single asset hotel deal ever recorded in the Edinburgh market. Additionally, the sale of the Ruby Stella by RE Capital to LaSalle for £48m was another significant transaction which it said “demonstrates the availability of Core capital”.

Savills research indicates that if all currently marketed assets, totalling approximately £6bn in known portfolios and larger single assets, are transacted this year, the market is poised to exceed the 10-year annual average of £4.85bn.

The South West recorded £147m in transactions, a 95% increase compared to full year 2024, while the West Midlands saw £153m , up 60% over the same period, highlighting a renewed interest in hotel investment outside of London and the South East.

Richard Dawes, director, hotel capital markets at Savills, said: “While fewer portfolio deals in the first half have weighed on year-on-year volumes, the robust pipeline of assets on the market suggests we will see a more active second half. With just over £6bn of known live opportunities, the UK hotel sector remains well positioned to deliver a strong full year performance.”