Hotel investment boom: A positive outlook for 2025
As the demand for accommodation grows in the UK, the latest research shows investment activity will surpass 2019 levels this year.
The latest Savills report shows a surge of international interest with 3,000 new rooms in London alone. This new confidence from overseas investors coincides with the recovery of international travel to the UK since 2023, particularly from Chinese and American tourists.
Inner-city Innovation
To support the demand for rooms, some cities such as London have enforced supportive planning policies to convert unused spaces, such as offices, into micro and aparthotels. These new accommodations are often located in central business districts, perfect for visitors travelling for work. London has seen £400 million worth of investment in these schemes in the past 12 months, with this market forecast to grow rapidly in 2025.
Experience and Events-Centred Travel
Forbes recently reported that travel spending is at its highest levels since 1960, with Gen Z and Millennials leading the shift towards ‘experience travel’, creating a boom in tourism centred around specific events and experiences.
From concerts to sporting events, investment in hotels near arenas and stadiums is growing, as the younger generations prioritise a more integrated hospitality experience. The ‘Taylor Swift effect’ is a perfect example of the influence of significant events on the hotel industry, with sales at hospitality venues within three miles of Wembley Stadium averaging £1 million per night and hotel occupancy reaching 94%, during her five-night residency last year.
Growing Luxury Market
Luxury hotels have seen the biggest levels of investment since 2023, and the sector is forecast to grow even further this year. With bespoke culinary experiences, large private aparthotels and wellness and health retreats gaining huge traction, investment in luxury hotels that offer special experiences is booming.
This growth also benefits visitors with smaller budgets, and research shows that more affordable stays at off-peak times are growing in popularity, with mid-week occupancy rates improving significantly in the past year.
Barriers to growth
Hoteliers will be well aware of the significant pain points for the industry this year, from a rise in minimum wage and tax cost pressures to chronic staff shortages. Creativity and innovation have never been more important for hotels to gain investment to thrive.
Despite these challenges, the outlook is positive, with over £5.75 billion worth of investment in hotels in 2024. With a 5% increase in inbound tourism predicted this year, it has never been more important for hotels to embrace technological change to tap into new markets and reap the benefits of these exciting levels of growth.
https://premierconstructionnews.com/2025/01/21/uk-hotel-investment-reaches-five-year-highs/
https://www.savills.co.uk/blog/article/371000/commercial-property/what-s-here-to-stay-in-2025–trends-in-the-hotel-sector.aspx
https://www.savills.co.uk/insight-and-opinion/savills-news/370917/savills–uk-hotel-investment-reaches-%C2%A35.75-billion-in-2024–doubling-2023-levels
https://www.visitbritain.org/news-and-media/industry-news-and-press-releases/visitbritain-publishes-inbound-tourism-forecast-0
