The UK hotel investment market experienced a significant uptick in activity during the third quarter of 2025, with transaction volumes reaching £1.04bn.
This marks a 28% increase compared to the same period in 2024, according to research from international real estate advisor Savills.
The surge was primarily driven by single asset transactions, which accounted for 92% of the total deal volume, nearly 60% above the 10-year Q3 average.
However, despite this growth, overall investment volumes remained 5% below long-term trends.
London leads the market with £697m in transactions
London continued to dominate the UK hotel investment sector, recording £697m in transactions during Q3 2025.
This represents a 42% year-on-year increase and underscores the capital's substantial share of the national hotel stock. Savills attributes this growth to a rebound in investor confidence, despite ongoing operational challenges.
A notable indicator of this positive sentiment is the tightening of prime yields in London, which decreased by 25 basis points for franchise assets compared to the first half of 2024.
Regional markets show strong growth
Regional UK markets also demonstrated robust performance, with significant increases in investment activity. Scotland saw year-to-date transactions reach £316m, an 85% rise from the previous year.
The South West recorded £180 million, up 360%, while the West Midlands achieved £256 million, marking a 310% increase.
Collectively, regional markets accounted for £1.3 billion in transactions, more than double the total from the same period in 2024, reflecting a growing investor interest beyond traditional core markets.
Domestic and international investors active in the market
Domestic owner-operators have been particularly active in the UK hotel acquisitions, comprising 45% of the total transaction volume in 2025, amounting to £1.2 billion.
This represents a 77% increase compared to the 10-year average, indicating a strong domestic confidence in the market.
International asset managers have also re-entered the UK hotel sector, focusing on value-add opportunities. They acquired £734 million worth of hotels in the first nine months of 2025, with international players accounting for 60% of this total, marking a year-on-year increase of over 1,000%.
UK pension funds have also become more active, with year-to-date volumes at £299 million, up 31% year-on-year, driven by diversification strategies and confidence in long-term sector fundamentals.
David Kellet, Head of Hotel Capital Markets EMEA at Savills, noted that while the first half of the year was characterised by operational and investor uncertainty, sentiment has stabilised through Q3, with over £1 billion in deals closed—a marked increase from 2024.
He highlighted the resilience of the single asset market, which accounted for over 90% of deal volumes in the quarter, and anticipates continued strength in this segment, along with potential for larger portfolio transactions in 2026.
