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Investor interest in UK hotels remains strong despite market challenges, according to Christie and Co’s latest Hotel Market Review.
The report notes that, despite economic, political and cost pressures, the UK continues to appeal as a “safe haven” for investment. Hotel owners and operators focusing on cost control, active asset management and operational innovation are best placed to navigate headwinds, it says.
Hotel performance has been mixed in 2025 to date. Hotstats data shows London’s RevPAR fell 2.4% year-on-year to May, due to price sensitivity and competition. Regional UK markets fared better, with some growth in cities such as York, Liverpool, Southampton and Edinburgh, driven by average daily rate (ADR).
Rising labour costs, following an increase to National Insurance contributions and a 6.7% rise in the minimum wage in April, have also weighed on profits, particularly for select-service hotels. However, utility costs have fallen by more than 4.5% so far this year, offering some relief.
Gross operating profit per available room (GOPPAR) declined 9.1% in London and 6.7% regionally in the first five months of 2025, compared with the same period last year. The report suggests these pressures may prompt operators to find new revenue streams and improve efficiency.
Transactional activity slowed markedly in the first half of 2025, after the strongest year for deals since 2018. UK hotel transaction volumes reached £6.6bn in 2024 but fell to £1.7bn in the first six months of this year. Regional markets accounted for £758m of this, with domestic investors making up 48% of the total.
Distress in the sector is rising, with Christie and Co reporting more instructions to sell hotels on a consensual or insolvent basis. Higher labour and energy costs, creditor actions and elevated interest rates are cited as key pressures.
With inflation forecast at 3.1% and RevPAR growth expected at between 1.5% and 3% depending on the market, financial strain is likely to continue.
Pierre Ricord, head of hotel consultancy at Christie and Co, said: “As we pass the midpoint of the year, our Hotel Market Review highlights that the UK hotel sector continues to demonstrate extraordinary resilience and adaptability, even in the face of growing complexity across global tourism and funding conditions.
“Investor appetite remains strong, particularly in regional markets where operational models align with cost pressures and evolving guest demand.”
