UK hotel investment volumes reached £1.1 billion in the first quarter of 2026, representing a 63% increase on the £680 million recorded in the equivalent period of 2025, according to the latest data published by Savills. The figures signal a meaningful acceleration in transactional activity after a subdued period during which misaligned price expectations between buyers and vendors constrained deal flow.
London dominated, accounting for 68% of total UK volumes in the quarter, with activity concentrated in large, single-asset transactions involving established institutional-grade assets. Named deals include Park Plaza Waterloo, Marriott Grosvenor Square, Radisson Blu Leicester Square, and a development asset on Grafton Street in Mayfair — a pipeline that reflects ongoing appetite among international capital for prime London hotel real estate.
What Is Driving the Upturn
The Savills analysis identifies two structural factors underpinning the Q1 acceleration. First, pricing expectations between buyers and vendors have narrowed significantly following a period of interest rate-driven uncertainty: sellers are now more prepared to accept the pricing that equity and debt markets will support, while buyers are deploying capital that has been sitting uncommitted for several quarters. Second, debt conditions have become more favourable, with multiple lenders competing for well-structured hotel transactions and margins on senior debt continuing to compress for assets in strong trading locations.
The firm notes that liquidity has improved across both equity and debt markets, with a borrower-friendly environment providing a structural tailwind for transaction volumes through the remainder of the year. Knight Frank's parallel Q1 data shows UK hotel RevPAR up 1.9% year-on-year in London and 4.8% across the regions — the underlying trading performance needed to justify the investment case.
Regional Standouts
While London captured the bulk of volume, regional UK outperformed on RevPAR growth. Glasgow recorded a 14% year-on-year increase in RevPAR in Q1 2026, with Cardiff up 10%, driven by event-led demand. Both cities have been the subject of significant new supply additions in recent years, making the RevPAR growth more notable: existing hotels are absorbing new competition while still growing rate.
Late-quarter openings — including Hotel Indigo Gloucester and The Forum — have begun to stabilise local pricing dynamics at the market level, though the broader regional picture remains supportive of further investment. Ennismore, which owns brands including SLS, Mondrian and SO/, has confirmed plans to open more than 35 hotels globally in 2026, with the UK debut of its Delano brand pencilled in for a 67-room property in Kensington, London, in the fourth quarter.
Large Portfolio Activity
In M&A, L&R Hotels has entered advanced discussions to acquire a UK portfolio of assets from Netherlands-based Vastint for approximately £420 million — a transaction that, if completed, would represent one of the largest single portfolio deals of the year. The Vastint portfolio is primarily UK-focused and includes assets in major city centres. Savills, which is tracking the transaction, has declined to comment on its progress beyond confirming that negotiations are ongoing.
The broader pipeline of potential disposals remains meaningful. Several institutional landlords with legacy hotel exposures are understood to be assessing exit options as the improving debt environment makes it easier to refinance buyers rather than requiring vendor finance. That dynamic is expected to sustain elevated transaction volumes into Q2 and Q3 2026.
Risks and Nuance
The headline investment figure should not be read as a wholesale normalisation of market conditions. Geopolitical uncertainty — centred on the Middle East and ongoing US trade policy volatility — continues to create noise in forward bookings for international leisure and corporate travel, which are the two demand segments most directly linked to rate and occupancy performance at the large London hotels that dominated Q1 deal activity.
Rising operating costs remain a structural challenge. The April 2026 increases to the National Living Wage and employer National Insurance contributions have added meaningfully to the payroll line at labour-intensive full-service hotels, compressing GOP margins even where RevPAR continues to grow. Analysts at PwC and Savills both flag that investors underwriting acquisitions on 2025 EBITDA will need to model a material cost step-up into their projections to avoid overpaying on current-year multiples.
The data nonetheless supports a broadly constructive view of UK hotel investment fundamentals. With the full-year 2025 figure standing at £5.0 billion — itself a significant recovery year — Q1 2026 tracking at an annualised run-rate above £4 billion suggests the structural demand for UK hotel assets, particularly in London, remains intact.