Market Overview
The UK hospitality real estate market includes a diverse range of accommodation assets, from budget and economy hotels to luxury properties and extended-stay serviced apartments. In 2024, hotel investment volumes surged to £6.6 billion on a portfolio-led basis, though the first half of 2025 saw a pullback with year-to-date investment totaling £3.01 billion, down approximately 28.6% year-on-year as the market normalized from elevated prior-year levels. Rental values and operational performance have remained relatively resilient, with UK regional RevPAR projected to grow around 1.5% in nominal terms for 2026. The broader UK real estate investment outlook has improved following repricing over recent years, supporting a more constructive environment for hospitality asset valuations going forward.
- •Market valued at approximately $127.0 billion in 2025 with 6.2% annual growth
- •UK hotel investment reached £6.6 billion in 2024 before moderating in H1 2025
- •Regional RevPAR growth expected at around 1.5% in nominal terms for 2026
Growth Drivers
Sustained growth in UK hospitality real estate is underpinned by recovering international tourism and business travel, both of which have rebounded strongly from pandemic-era lows. The United Kingdom's position as a leading global destination for leisure, cultural, and corporate travel ensures steady demand across asset classes. Additionally, limited new supply entering the market in many sub-sectors creates pricing power for existing quality assets. Low interest rate expectations and an improved total return outlook for UK real estate in 2025 are expected to support renewed investor appetite for hospitality assets as the year progresses.
- •Recovery in international and domestic tourism driving occupancy and rate growth
- •Constrained new supply pipeline supporting fundamentals for existing properties
- •Improved investment return expectations and financing environment underpinning capital flows
Segmentation and Regional Analysis
The market is segmented across hotel types including budget and economy, mid-scale, upper mid-scale, and luxury properties, alongside growing categories such as serviced apartments. London remains the dominant market for luxury and high-value hospitality assets, benefiting from international visitor flows and corporate demand. Regional cities including Manchester, Birmingham, Edinburgh, and Bristol have seen increasing investor interest as domestic tourism and regional business travel continue to grow, offering attractive yields relative to the capital. Budget and economy segments have shown particular resilience due to price-sensitive leisure demand and cost-conscious business travelers.
- •London leads luxury segment while regional cities attract growing investment in mid-scale and budget properties
- •Serviced apartments and extended-stay formats gaining share amid demand for flexible accommodation
- •Regional UK locations offering yield premium over London in many hospitality sub-sectors
Trends and Outlook
What are the recent trends and outlook?
Sustainability and energy efficiency are increasingly central to hospitality asset management and valuation, driven by regulatory requirements and guest expectations. Properties with strong environmental credentials are likely to command premium valuations and occupancy levels over time. The adoption of technology including contactless services, data-driven revenue management, and automated operations is reshaping the guest experience and improving operating margins. Over the medium term, the sector is expected to benefit from continued tourism growth, selective new supply additions, and the normalization of investment activity as financing conditions remain supportive of transaction volumes.
- •ESG and energy efficiency becoming key determinants of asset value across the hospitality portfolio
- •Technology integration driving operational efficiency and enhancing guest experience and loyalty
- •Investment activity expected to recover in 2025 after H1 slowdown, supported by improved financing conditions
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Connect to an analyst →Market size and forecast are Claight Analysis, informed by public research and industry data. Historical years before 2025 and all forecast years are Claight estimates at the stated CAGR. Retrieved 2026.