The Risk Hotel Investors Are Still Underpricing
This week, AHC 2026 brings more than 1,100 senior decision makers from UK hospitality investment, development and operations to Manchester Central. Its theme, All In: Mastering Risk for Reward, could hardly be better timed. The programme even includes a keynote on odds and decision making under pressure from former professional poker player Caspar Berry.
For hotel owners and investors, that is not a metaphor. It is the job description for the next eighteen months.
So maybe it is worth laying the cards on the table.
The capital has not left the table
Despite everything 2026 has thrown at the sector, investors keep playing. According to Savills, UK hotel transactions reached £2.1 billion in the first half of the year, almost £500 million ahead of the same period in 2025, with London accounting for £1.4 billion. The UK attracted close to a quarter of all European hotel investment, reinforcing its position as the region’s most liquid hotel market.
Look beneath the headline, though, and the shape of the market is changing. HVS reports that European transaction volume fell by 10% to €9.4 billion in the first half, still above the ten-year average, with portfolio deals shrinking and single assets making up almost three quarters of activity. Private equity was the largest net seller. Real estate investment companies and owner-operators were the largest net buyers.
In other words, capital is rotating from shorter-hold, exit-focused money towards owners who intend to run hotels for longer. That matters, because longer hold periods put operating performance, and the people who deliver it, at the centre of the investment case.
We are seeing that reflected in the mandates coming across our desk, including investors strengthening their in-house portfolio management and value-creation capability. The distinction is important: the requirement is increasingly for people who can actively influence performance, rather than simply monitor the operator.
Rate is rising. Margin is not.
The trading picture explains why. RSM’s analysis of HotStats data shows UK average daily rate up 4% in July 2026 to £182.47, with RevPAR also ahead of last year. Yet gross operating profit margins slipped from 43.9% to 43.0% as occupancy softened and utility costs per occupied room climbed. London margins fell further.
AHC’s organisers put the additional annual cost burden on operators at around £3.5 billion, combining last year’s employer National Insurance rise with April’s increase in the National Living Wage to £12.71 and reduced business rates relief.
Pushing rate is no longer enough on its own. The winners will be the businesses that manage cost, structure and commercial strategy with real discipline.
We are seeing the same issue in repositioning assignments. On one current European mandate, a substantial refurbishment and international rebranding is only part of the investment case. The equally important decision is who leads the hotel through pre-opening, builds the team and commercial culture, establishes the new market position and converts the capital invested in the asset into sustainable NOI.
The refurbishment can be modelled. The leadership execution is harder to put into a spreadsheet, but no less material to the return.
The policy deck has been reshuffled
Then there is Westminster. It feels fitting that AHC meets in Manchester, given that the former Mayor of Greater Manchester now leads the government and devolution sits at the heart of his agenda. Three developments deserve a place on every investment committee agenda this autumn.
First, the overnight visitor levy. On 10 September the government confirmed that English mayors will be given powers to introduce a percentage-based levy on overnight stays. Early reports suggest there will be no national cap, with mayors expected to set out how revenue would be spent by 2028. Edinburgh’s 5% levy, which applies to stays from July 2026, already offers a live case study in what collection, pricing and guest communication really involve.
Second, business rates. The new government has announced a 20% cut for pubs, social clubs and live music venues in England, and a review of how pub and hotel rates are calculated. Hotels were not included in the initial cut. Chancellor John Healey’s first Budget on 28 October is expected to set out wider reform, and owners of larger assets will be watching closely.
Third, employment law. From 1 January 2027, the qualifying period for unfair dismissal claims falls from two years to six months, and the existing cap on compensatory awards disappears. For senior, well-paid appointments, the cost of getting a hire wrong is about to rise sharply.
The risk nobody puts in the model
Investment committees are highly skilled at pricing the risks they can see: interest rates, exit yields, refurbishment budgets, RevPAR scenarios.
The risk that is still routinely underpriced is leadership.
A hotel platform bought on a ten-year hold is, in practice, a bet on the people running it. A general manager or chief executive who has only ever delivered growth in benign conditions is a very different proposition from one who has navigated a cost shock, a policy change and a demand wobble in the same year.
When margin is defended one percentage point at a time, that difference shows up quickly in the numbers.
We see this playing out directly across our current work at HPG Advisory Services.
For one institutional investor, we are helping strengthen the senior team responsible for originating new opportunities and driving value creation across the existing portfolio. Elsewhere, we have been working with an owner on the leadership required to reposition and relaunch a major European hotel following significant investment. And for a fast-growing hospitality platform, the conversation has moved beyond simply filling a senior role to identifying the operational leadership capable of supporting the next stage of growth and, ultimately, succession.
Different businesses, different situations, but the underlying question is the same:
Do we have the leadership capability to deliver the investment thesis?
That is why the brief is changing. Investors are increasingly looking for leaders who can move comfortably between the asset, the P&L and the boardroom; who have navigated cost pressure, repositioning and organisational change; and who can demonstrate judgement when the assumptions in the original business plan no longer hold.
That is also changing how senior appointments are assessed. Track record remains important, but boards are probing much harder into judgement, resilience, decision-making and leadership behaviour — qualities that are difficult to establish from a CV or conventional interview alone.
The organisations moving fastest give their human capital strategy the same rigour as their investment thesis: designing the organisation before the deal completes, planning succession before a key person resigns, and treating a senior appointment as a capital allocation decision rather than an HR process.
Three questions for every investment committee
Whatever the conversations in Manchester conclude, these three questions deserve time on the agenda this autumn.
1. If your hold period has lengthened, has your leadership plan lengthened with it?
A structure built for a three-year exit doesn’t always suit a ten-year hold.
2. Who in your business owns policy risk?
The visitor levy, rates reform and employment law land on operations, finance and pricing at once. Someone needs to join the dots.
3. How confident are you in your next senior hire?
From January, the window to judge a new appointment shrinks to six months, while the potential financial exposure if it goes wrong increases materially.
Playing the hand well
None of this is a reason to fold. The fundamentals that keep drawing capital to UK hotels, from London’s global appeal to recovering inbound tourism, remain intact, and VisitBritain expects 45.5 million overseas visits this year.
But mastering risk for reward means being honest about every risk in play, including the one that sits in the boardroom.
If you would like to talk about leadership, organisational design or executive search for your hospitality business, please contact Dan Akhtar, Managing Director, at dan@hpgsearch.com or on +44 (0)20 8600 1166.