UK hotel investment reached an estimated £1.04bn in the third quarter of 2025, according to international real estate advisor Savills.
The figure marks a 28% increase on the same period last year and was primarily driven by single asset transactions, accounting for 92% of deals and rising almost 60% above the 10-year quarterly average. Despite this, overall investment volumes remained 5% below long-term trends.
London led the market with £697m of transactions in the quarter, a 42% year-on-year increase. Savills said this reflected the capital’s large share of UK hotel stock and a rebound in investor demand, despite ongoing operational challenges. Prime yields in the city compressed by 25 basis points across franchise assets compared with the first half of 2024.
Domestic owner-operators were the most active buyers in 2025 to date, acquiring £1.2bn of hotels – 45% of total volumes. This represents a 4% rise on last year and a 77% increase against the 10-year average. Savills said this was driven by expanding platforms and renewed confidence in the UK market, with deals such as Barons Eden illustrating the trend.
International asset managers have also returned, targeting value-add opportunities. They purchased £734m of hotels in the first nine months of 2025, up 18% year-on-year. Overseas investors accounted for 60% of this total, posting an increase of more than 1,000% compared with 2024. UK pension funds were also found to be more active, with volumes rising 31% to £299m, driven by diversification strategies and confidence in long-term fundamentals.
Regional markets added further strength. Scotland recorded £316m of activity in the year to date, up 85% on last year; the South West reached £180m, up 360%; and the West Midlands hit £256m, a 310% rise. Across all regions, volumes totalled £1.3bn – more than double the same period in 2024 – reflecting growing investor appetite outside core locations.
David Kellet, head of hotel capital markets EMEA at Savills, said: “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 £1bn 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.”
