Investment in the UK hotel sector reached an estimated £1.04 billion in Q3 2025, according to research from international real estate advisor Savills, marking a 28% increase year-on-year.
The uplift was underpinned by single asset transactions, which accounted for 92% of total activity and came in nearly 60% above the 10-year Q3 average, even as overall investment volumes remained 5% below long-term trends.
London dominated the market, recording £697 million in deal volumes, a 42% rise on the same period last year. Savills said the capital’s strong performance reflects its significant share of the UK hotel stock and a rebound in investor appetite, despite ongoing operational challenges. Investor sentiment was further evidenced by yield compression, with London prime yields tightening 25 basis points across franchise assets compared with H1 2024.
Domestic owner-operators have been a key driver of activity in 2025, accounting for 45% of acquisitions, or £1.2 billion year-to-date. This marks a 4% increase on 2024 and a 77% rise compared with the 10-year average, with notable transactions such as Barons Eden illustrating the expansion trend.
At the same time, international asset managers have re-entered the UK market, focusing on value-add opportunities. They acquired £734 million of hotels in the first nine months of 2025, up 18% year-on-year, with international players representing 60% of this total and posting a year-on-year increase of more than 1,000%. Meanwhile, UK pension funds also boosted their exposure, investing £299 million year-to-date, up 31% year-on-year, driven by diversification strategies and confidence in long-term fundamentals.
Outside London, regional markets showed exceptional growth. Scotland posted £316 million in activity year-to-date, an 85% increase; the South West reached £180 million, up 360%; and the West Midlands reported £256 million, up 310%. In total, regional volumes hit £1.3 billion, more than double the same period in 2024, highlighting heightened investor interest beyond traditional core markets.
David Kellet, Head of Hotel Capital Markets EMEA at Savills, commented:
“While the first half of the year was defined by operational and investor uncertainty in the UK hotel market, sentiment has stabilised through Q3 and we have seen over £1 billion of deals closed – a marked increase from 2024. The strength and resilience of the single asset market stands out, with single assets making up over 90% of deal volumes in the quarter. We expect the single asset market to remain robust whilst also anticipating more larger portfolios to transact in 2026.”
