Significant deals in the first half of the year include Blackstone’s £850 million acquisition of the 33-strong regional Village Leisure portfolio, Starwood Capital Group’s £800 million purchase of 10 Radisson Edwardian Hotels in London and Landsec’s £400 million disposal of its hotel portfolio to Ares Management, where Knight Frank advised the vendor.

Knight Frank’s analysis shows that H1 investment was just 10% lower than the pre-pandemic level (H1-2019) but activity has been dominated by the completion of a few sizeable portfolios transactions.

Historically, hotel investment has been driven by a mix of sizeable portfolio and single asset deals, however, in H1-2024 there was a notable lack of quality, single asset hotels available for sale, resulting in a 19% decline year-on-year in the number of single asset transactions and a 34% decline in the transaction volume. The challenging investment market has also impacted the number of development and individual fixed income deals that have transacted, resulting in portfolio transactions accounting for some 76% of the total H1 transaction volume, compared to just 53% in H1-2019, when a similar level of portfolio transactions took place.

London has been the epicentre of activity during the first six months of the year, with some 70% of investment focused on the capital, driven by overseas investors who accounted for acquisitions totalling £1.3 billion. US investors have dominated the landscape, accounting for 77% of the total UK investment activity.

According to Knight Frank, the outlook for H2-2024 is encouraging, with momentum for investment in the UK hotel sector continuing to build and benefitting from a diverse pool of well capitalised investors. Whilst levels of distressed sales are expected to remain substantially lower than compared to other cycles, there is evidence to suggest that stakeholders are not only increasing the pressure on owners to bring assets to the market, but at deliverable levels that will conclude in a successful and more timely sale. The second half of 2024 is expected to yield further robust activity, with various other hotel portfolios seeking to change hands and the number of single-asset opportunities coming to the market has increased, albeit of mixed quality. Yet, while some sellers’ expectations have now started to edge closer to buyers’ pricing levels, vendors are having to remain patient and bide their time to achieve their investment goals.

The direction of travel for the sector is positive and the volume of portfolio transactions is evidence that the sector remains attractive. An increase in the quality and the number of hotels seeking to transact is expected, as hotel owners who have extended their investment cycles now seek to realise their exit strategies. Where a particular asset meets all the investment criteria, we have seen certain buyers willing to pay full prices for these assets. With a strong pipeline of hotels currently in legals, the Knight Frank Hotels teams expects this momentum to continue, and an interest rate cut will serve to further enhance the current optimism for investment in the UK hotel market.Henry Jackson, Partner and Head of Hotel Agency at Knight Frank

Ella Fabregat
Head of Commercial PR
Knight Frank