A lack of portfolio deals was the most notable feature of the UK hotel investment market, during the first half of 2025. This lack of big ticket transactions means headline figures are down, though single asset sales remain resilient.
An assessment of the market by Savills, taking the temperature towards the end of September 2025, noted a year to date investment volume just over GBP3 billion. While this was down around 28.6% when compared directly with 2024, the lack of large, multiple site transactions has been offset by single hotel sales. These are up 33.1% on the previous year, and sit at a level 38.3% ahead of the ten year average, giving cause for optimism.
A positive outlook
With investor appetite remaining strong, Savills is predicting a continuing growth in transaction volume as 2025 ends, with the market improving into 2026. The drought of portfolio deals is expected to ease, too. “The UK’s historically diverse buyer pool will always be beneficial,” they noted in a market update, adding that the liquidity of UK markets also gives buyers confidence they can exit quickly, at any point, if they desire.
Confidence in the market has been maintained despite operational challenges in the short term. With new supply coming into the market, the revpar measure was softer in the first half of the year, though this has seen improvement during the summer months of July and August.
Moves by the new UK government to increase basic wages and National Insurance tax costs have impacted negatively on UK hotel profitability. Gross operating profit per available room is measured down 4.2% through 2025, as higher wage and tax costs bite.
Savills calculates a fall in profit margins to 34.6%, though it says hoteliers have done well to mitigate the impact of those higher costs. The agents warn that staffing resource will remain a challenge, advising: “The use of technology will remain pivotal for hoteliers to successfully adapt to the current high-cost environment.”
In the year to date, new UK hotel supply has been slightly ahead of the long term average, at 1.1%, and this is set against a 0.6% increase in market demand. Thanks to increases in construction costs, the forward pipeline is now looking weaker, meaning the recent uptick is likely to fade, returning demand to the upside of new market supply.
UK occupancy beats peers
Despite all of the above, occupancy levels at UK hotels remain relatively strong, at 76.1%. Compared to other European markets, only Ireland, at 77.2%, is performing better, with the UK registering notably ahead of markets in France, Germany, Italy and even Spain.
Hotels in the UK regions have, during 2025, largely performed better than those in London. Hotels in the capital are more reliant on US visitors, whose arrival volume has been impacted by depreciation of the dollar. Major events have also boosted trade in some regional markets. In Cardiff, for example, revpar is up 6.9%, while Liverpool hoteliers have registered a 4.3% rise.
