For another full year, single-asset hotel sales dominated the United Kingdom and Ireland transactions market, but there were some notable portfolio sales. Hotel industry experts are confident that 2026 will be a positive year for transactions, but macroeconomic trends and updates to the U.K. budget will give hoteliers some pause.
Victoria Hills, partner, corporate real estate at law firm Macfarlanes, said a trend that became more pronounced across 2025 is that deals are taking longer to come to fruition.
“2025 has been an OK year; 2026 is set up to be a good year, but macroeconomic trends could mean it will not be,” she said.
Laura Wild, partner and global co-leader of hotels and hospitality at Bryan Cave Leighton Paisner, said in the run-up to the U.K. government’s Nov. 26 budget announcement, there were many nervous hoteliers and hotel investors. But at least on the transactions side of the hotel industry, there were few surprises which would prevent hotel investment.
“We did see a reduction in fourth-quarter transactions as investors paused and waited to see, as with most budgets, what it would contain. That is financially prudent, but now it has been delivered, the sentiment is pretty positive. Now we have certainty,” she said.
Nervousness over the U.K. budget extended to foreign investors, who still look at the U.K. as a safe market and one that is a beneficiary of the U.S. tariff policy, Wild said. She agreed it's taking longer for hotel deals to cross the finish line.
“With the budget announced at the end of year, it was always going to be tight to have deals announced before the end of the year. Transactions are taking a little longer, with a focus on due diligence, and financing is taking time,” she said.
But there are plenty of reasons for “cautious optimism,” she said.
“I was quite upbeat at the start of 2025, following the high transaction figures seen in 2024, which were dominated by portfolios. 2025 was the return of the single-asset transaction, but, overall, it’s not been as strong, and I’ll be surprised if [in full-year 2025] we hit 2024 numbers,” she added.
Due diligence
The U.K. government's November budget emphasized the need for further due diligence in deal underwriting, Hills said.
“Business rates were a notable feature of the budget, and they will be a real feature on U.K. transactions,” Hills said. “Hoteliers, for example, will need to offset them by building revenue, and of course you have to apply a yield to that, which can have an impact on price, a pretty significant one. When values change, that leads to opportunities for some, but not for others.”
Concerns around business rates are genuine, Wild said. The big question is whether the increased business rates and employee costs can be mitigated with artificial intelligence and other technology.
Higher costs from business rates and National Insurance contributions will further jolt profit and loss statements from April, Hills said.
“Hoteliers need to continue to squeeze efficiencies, but how many efficiencies are left?” she asked.
The depth of underwriting has grown, Wild added.
“Hoteliers require a genuine understanding of the asset they are buying and the risks involved. [A deal] can be easier to stack up if you are a longer-term hold. We’re seeing people spending a lot of money on due diligence and still saying no,” she said.
A major catalyst for U.K. hotel deals is that the finance side is booming, Wild said.
“It is highly competitive, and it includes the usual suspects. The U.K. banks have done a lot of transactions, and we are also seeing an increase in financing from insurers and debt funds. The German banks are also very competitive,” she said. “We are seeing a lot of hotel refinancing, but less acquisition financing. Hotel owners are swapping lenders, and we’re not seeing much development financing as construction costs remain expensive.”
Hills said private equity is in the market for hotels, as are cash buyers.
“Private credit is very attractive, and we’ve seen more refinancing because the terms are good. There is a lot of money looking to find an appropriate risk-adjusted means to enter the industry. There are a number of funds that need to raise money, and that is challenging,” she said.
In it to win it
U.K. and Irish hotel investors should see acquisition opportunities in 2026, Wild said.
“Hotels will be put on the market. Hotels are seen as being inflation-busting. Expect private equity capital, high-net-worth individuals and family offices to be involved,” she said.
Major portfolio deals will most likely see partners coming together to get a deal done, Hills said.
“We’ve also seen a rise in the number of joint ventures across a number of areas, not just in hotels. This will often be a combination of money and expertise, the [operating company], the [property company],” she said. “Flexibility and nimbleness continue to be important. The search is on for [real estate] that can be repurposed efficiently,”
She added she expects a focus on hotels with leases in the southeast of England.
Hills said the €1.4 billion portfolio sale of Dalata Hotel Group to Pandox AB and Eiendomsspar stood out as the hospitality deal of 2025.
The July 14 deal saw the two Scandinavian partners agree to an updated cash offer of €6.45 ($7.54) per share. Scandic Hotels, a long-term partner of Pandox, has been chosen to manage the portfolio.
"We’ve seen a lot of single assets being transacted, but the Dalata deal bucked the trend," Hills said.
Hills’ work on that transaction was the “most fun of my professional life to date. It was a fascinating deal, working with the dynamics of that transaction and being able to help the client secure the deal,” she said.
“Pandox had long admired Dalata. It also acquired the Jurys Inn portfolio, and the Dalata portfolio complemented their existing portfolio,” she said.
U.K. hotel portfolio transaction volumes fell in 2025, according to business advisory Savills. Full-year U.K. hotel deal volume totaled £750 million ($1 billion), “materially lower than the £3.1 billion recorded in 2024. But activity in the single-asset market strengthened significantly, accounting for 85% of investment volumes last year, up 68% year‑on‑year,” according to CoStar News’ Luke Haynes.
Another potential headache is the U.K. government’s decision to allow mayors of cities to be the ones responsible for applying bed taxes, an additional cost that has not traditionally been part of the U.K. and Irish hotel industry.
“New U.K. city levies on rooms will clearly have an impact on the consumer,” Wild said,
She added that for certain hotel segments, such as luxury, the levies could be more easily absorbed than the budget segment where they would have a more material effect.
“Tourists benefit from exchange rates, but I think the revenge-travel boost is likely to taper off. It’s all out our systems by now and some hotel guests will be focused on cost-of-living increases,” Wild said. “Inflation is getting better … but consumers are being cautious about where to spend their cash. People are going out less, and restaurants and pubs are closing.”