Following a record-breaking 2024 - the strongest year since 2018 with hotel transaction volumes exceeding £6.6 billion - 2025 experienced a marked slowdown, with deal volume expected to reach £4.3 billion (based on preliminary figures, excluding development sites). This contraction was driven primarily by a shift in deal composition: while 2024 was dominated by large-scale M&A activity, 2025 saw single-asset transactions account for nearly 80% of deals, a complete reversal of the previous year. The takeover of Dalata Hotel Group plc, comprising 56 hotels and approximately 12,200 rooms under the Maldron and Clayton brands, by a Pandox AB-Eiendomsspar AS consortium was the largest portfolio deal of the year. London saw a flurry of large single asset transactions towards the end of the year. 

As a result, the UK’s share of European hotel deal volume dropped from a third in 2024 to a fifth in 2025. Domestic investors stepped up significantly, while cross-border capital, particularly from the US, softened amid geopolitical uncertainty and tariff-related volatility. Private capital and high-net-worth individuals became more active, whereas institutional investors remained present but cautious. Pure fixed-income hotel investments are less attractive; operational real estate and value-add opportunities dominate investor interest, with some moving toward B-locations for better value. 

Operational performance added further complexity to the market in 2025. London RevPAR declined by 0.4% year-to-November, reflecting heightened price sensitivity, intensified competition particularly in the luxury segment, and the strength of Sterling against the Dollar. In contrast, regional markets performed better overall, posting a 1.2% RevPAR increase, though variability widened: Cardiff and Liverpool led the RevPAR growth leaderboard, while several markets recorded notable declines. 

Despite rising labour costs, April’s National Insurance increase, and a 6.7% uplift in the National Minimum Wage, coupled with persistent inflation, the hotel sector has demonstrated resilience in profitability, with GOPPAR declining by just 0.6% in both London and the wider UK. This stability has been supported by growth in total revenues and a 4.5% reduction in utility costs across the UK. 

These headwinds contributed to a rise in insolvencies across the sector over the past year, as well as leases gaining popularity among owners seeking relief from operational stress. 

Despite these challenges, liquidity remains in the market and there is reason for optimism. More quality stock is becoming available, driven by assets reaching the end of their investment life cycles and break-up sales from large portfolios transacted in 2024 following a flip to franchise. At Christie & Co, we have seen a steady rise in deal activity throughout 2025, with almost 100 hotel deals completed across the year. The pipeline for next year is already strong, and we expect to see portfolio-led activity in early 2026 as some deals currently on the market are delayed. 

Creative deal structures and realistic pricing based on current earnings remain key to getting transactions over the line. Financing conditions have also improved, with the Bank of England base rate down to 4% and lenders, particularly alternative and private funds, showing renewed appetite, albeit with tighter covenants and a preference for refinancing over speculative development. 

In summary, 2025 has been a year of recalibration: fewer large-scale deals, more granular activity, and heightened focus on operational resilience. Despite the slowdown, the market remained active and selective, and recent announcements from the UK Budget in late November are likely to accelerate decision-making for hotel owners at the start of 2026.