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While hoteliers face challenges, lender interest in London and rest of UK remains high

Hotel investors still view London as a top target in Europe
The keynote guest speaker Surinder Arora (left) said he brings his Indian heritage to Arora Group, the hotel and hospitality company he founded. “The guest is royalty, and the staff are family, but only if they are prepared to give Arora 100%,” Arora said. Also pictured is Jonathan Langston of Questex. (Simon Callaghan/Questex)
The keynote guest speaker Surinder Arora (left) said he brings his Indian heritage to Arora Group, the hotel and hospitality company he founded. “The guest is royalty, and the staff are family, but only if they are prepared to give Arora 100%,” Arora said. Also pictured is Jonathan Langston of Questex. (Simon Callaghan/Questex)
CoStar News
October 1, 2025 | 1:45 P.M.

MANCHESTER, England — While hotels broadly face challenges in terms of demand and increasing costs, there is significant interest from banks and other lenders to deploy their capital in the space.

Attendees at the second day of the Annual Hospitality Conference during a panel titled “The lending landscape: Trends, liquidity and smart financial structures” said London is the most liquid market in Europe and despite domestic and geopolitical headwinds, the capital of the United Kingdom remains on many investors' wish lists.

Hoteliers in attendance agreed that smart commercial entries, disciplined operations and flexibility at exits still made London — and to some extent the U.K. regions — a smart play. Investors remain uncertain around interest rates, taxation levels and the upcoming Autumn Statement from the U.K. Chancellor of the Exchequer.

The debt market is absorbing smaller lenders entertaining higher holds, and there are more levers than ever able to be deployed.

"We are seeing lighter covenant testing. Depending on your risk appetite, there is a lender that can support you," said Anthony Nutkins, head of hotels and healthcare at bank Coutts.

Nathan Jackson, director at LaSalle Investment Management, agreed that “covenants are slipping slightly, but we are not at the covenant-light area."

"Everyone is being relatively sensible, but how far that will be pushed is the question,” Jackson said, adding he was not seeing anyone feeding at the bottom.

In times of added concern, hoteliers to some degree go back to the basics, but a little risk is required along with having the right location, the right demand drivers and the right acquisition price.

Quotes of the Day

“When I opened my first hotel in 1999, the airline crew rate was £70 per night, and we paid [housekeeping] £4.50 an hour. Now we pay them £13 an hour, but the crew rate is in the high £50s, maybe just into the £60s. The math is apparent.” —Surinder Arora, founder and chairman, Arora Group

“Fifteen years ago, we were converting offices to Hampton by Hiltons, always regeneration schemes with tax breaks. Now conversions are a massive opportunity.” —Nick Smart, vice president of development, United Kingdom, Ireland & Nordics, Hilton

“Historically, there has been a discrepancy between the sentiment to invest from our Asian peer [owner and investor] group to the assets that are out there. They would not go farther than [London] Zone 1 because of the familiarity and also that of their backers.” —Edwin Liu, managing director and chief investment officer, Heeton

Photo of the Day

From left to right: Jon Asumendi, of Starwood Capital; Jens Blomdahl, of KSL Capital Partners; Andreea Bodea, of Pygmalion Capital; Puneet Kanuga, of EQ Group; and Pierre-Edouard Vintrou, of EQ Group; participate on a hotel investment panel at the Annual Hospitality Conference in Manchester, England. (Terence Baker)
From left to right: Jon Asumendi, of Starwood Capital; Jens Blomdahl, of KSL Capital Partners; Andreea Bodea, of Pygmalion Capital; Puneet Kanuga, of EQ Group; and Pierre-Edouard Vintrou, of EQ Group; participate on a hotel investment panel at the Annual Hospitality Conference in Manchester, England. (Terence Baker)

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News | While hoteliers face challenges, lender interest in London and rest of UK remains high