With the conference season in full swing, hospitality investment is sending a clear signal that resilience remains the defining feature of the sector. Despite cost inflation, operational pressures, and continued uncertainty in wider financial markets, capital flows into hotels are accelerating. From London to Rome and Manchester, investors are not just participating—they are adapting strategies to new conditions and exploring markets and asset classes once overlooked.
Drawing on the Hilltop Tracker Q3 2025, as well as insights from the Italian Hotel Investment Conference (ITHIC) in Rome, and sessions at the Annual Hospitality Conference (AHC) in Manchester, a consistent picture emerges: capital is present, liquidity is returning, but the path to concluding deals is perhaps more complex than ever.
Volumes on the Rise
The third quarter of this year, usually a quieter period for hotel transactions, has defied expectations. According to the latest copy of the Hilltop Tracker, more than €5 billion in hotel deals were recorded across Europe, compared to €2.2 billion in the same period in 2024. Around 80 transactions closed, spanning single-asset sales, portfolios, and platform deals.
London led the charge, with nearly £900 million in transactions and a further £1.7 billion already in the pipeline for Q4. As the Tracker highlighted, “This continued momentum is solidifying 2025 as a standout year for London, one of the world’s most sought-after hotel investment markets.”
A Market in Transition
In Manchester, the AHC 2025 revealed cautious optimism around the UK outlook. Liquidity has returned, debt markets are accessible, and investors are actively pursuing deals—albeit with greater selectivity. Blackstone’s Peter Werhahn summed it up: “We are relatively bullish driven by our recent portfolio selection. We are seeing resilient leisure demand across all our estate.”
At the same time, landmark deals are shaping the narrative. Pandox’s €1.4 billion bid for Dalata Hotels was described as a “once in a decade opportunity,” underscoring the appetite for scale when conditions align. Meanwhile, opportunistic investors like The Baupost Group point to owners who “hung on through Covid” now looking to exit, creating new opportunities for capital to move.
Tom Oakden of Hilltop Advisory was also in Manchester for AHC, and his reflections captured some of the most pressing industry concerns.
- Costs remain the dominant headwind. Operators continue to feel the squeeze of payroll inflation, rising F&B costs, and the burden of business rates. This is echoed by wider insolvency data showing 1,706 hospitality companies entered closure in H1 2025. These persistent pressures underline the importance of investors stress-testing operating models.
- AI: a double-edged sword. Tom noted, AI has become a recurring talking point at industry conferences. Its potential to optimise pricing, forecasting and guest personalisation is clear—but, as he puts it, “AI won’t make beds.” Labour-intensive operations like housekeeping remain resistant to automation. AI also brings with it infrastructure demands—both in energy and data—that cannot be ignored.
- Performance plateauing. London, long a bellwether for UK hospitality, is showing signs of moderation. Tom highlighted growth of “sub 3%,” broadly consistent with the Hilltop Tracker’s view that while London remains a global investment magnet, trading performance is relatively flat. Jacob Rasin, SVP Transactions at Stockholm-based Pandox even described the market as “gray and dolphin-ish — up and down, up and down,”. Investors are therefore looking at yield compression and capital flows as much as operating outperformance when making decisions.
- The investment market outlook. Tom’s Hilltop Tracker offers clarity on this. Transaction volumes are not only holding up but expanding, particularly in single-asset deals. The divergence of flat operating growth but buoyant investment volumes illustrates the resilience of hotels as an asset class, and the depth of capital seeking exposure.
Reinventing the Playbook
Another theme at AHC was the reinvention of traditional private equity strategies. The familiar buy–fix–sell cycle is under strain. Funds are stepping in mid-cycle, taking on asset management roles, and creating more flexible capital solutions to keep deals moving. One panellist remarked: “It’s as hard to sell as it is to buy.”
Exits are no longer straightforward; secondary trades, portfolio reshaping, and creative liquidity pathways are becoming more common. At the same time, investors stressed the critical role of trust between operator and capital provider—highlighting that partnerships are often the difference between a deal happening or stalling.
Financing Selectivity
Even with capital flowing back, financing is far from straightforward. Lenders are now likened to judges in a “beauty contest,” rewarding only the most bankable deals. Rachel-Felicia Glenn of Horwath HTL explained: “Two hotels with identical Ebitda can have very different financing outcomes depending on their revenue mix.”
Prime London and Edinburgh assets remain the most attractive, drawing multiple competitive term sheets and aggressive terms. Regional UK markets, however, face tougher scrutiny, conservative covenants, and reduced credit given to ancillary revenues such as spas, golf, or F&B. For sponsors, credibility and governance are just as important as asset quality in today’s market.
Selective Growth, Long-Term Opportunity
Looking forward, several trends are clear:
- Granular resilience: Single-asset deals will continue to dominate into 2026, even as larger portfolios slowly return.
- Luxury appetite: The “flight to luxury” is alive and well, with record-breaking per-key prices being achieved.
- Selective lending: Sponsors with proven operational expertise and robust governance will unlock the best financing terms.
- Regional expansion: Both in the UK and Italy, secondary markets are gaining investor attention, though success depends on infrastructure and workforce readiness.
- Operational discipline: Returns will increasingly hinge on brand strength, innovation, and cost control, not just financial engineering.
As David Kellett of Savills put it: “The strength and resilience of the single asset market stands out… We expect the single asset market to remain robust whilst also anticipating more larger portfolios to transact in 2026.”
Conclusion
Hospitality investment in 2025 is both resilient and reinvented. Liquidity is returning, capital is flowing, and both the UK and continental Europe are once again attracting global investors. Yet this is a more complex and fragmented market than before. Deals are harder won, financing more selective, and operators still under pressure.
The winners in this cycle will be those who combine ambition with discipline, pursuing luxury and leisure assets in both prime and emerging destinations, while forging strong operator partnerships and maintaining credible, flexible capital structures. From London’s billion-pound development pipeline to Italy’s high-growth regions, opportunities are abundant, but so too are the challenges.
The shift is already unfolding across the market, underscored by HPG’s current search for a new entrant to the hotel investment space, working with a European real estate partner to establish a hotel platform. It signals how fresh capital, bold talent, and strategic reinvention are shaping the next phase of hospitality investment.
For a more in-depth analysis and to receive quarterly editions of the Hilltop Tracker, please get in touch.
Dan Akhtar, Managing Director – HPG Advisory Services
+44 208 600 1166 / +44 7808 157796 / [email protected]
