London has been voted the most attractive city in Europe for hotel investment for a second consecutive year, according to a Deloitte survey of hospitality owners, lenders, developers and investors.
Edinburgh retained the number one spot as most attractive UK regional city for investment for a fourth year, with almost three out of four hospitality leaders (72%) saying they are optimistic about the UK hotel market’s future.
Deloitte’s poll of 100 senior hospitality leaders for its 2024 European Hotel Industry and Investment Survey found expectations of a surge in merger and acquisition (M&A) activity in the year ahead, with 70% anticipating an increase in deals.
More than half those surveyed (54%) said they plan more acquisitions next year.
However, there was a fall of five percentage points year on year to 59% in the proportion expecting the UK hotel sector to grow ‘materially’ in the next five years and a 10-point drop to 54% in those expecting the sector to become more profitable over the same period.
Four out of five respondents cited rising costs (79%) and labour challenges (71%) as the biggest impediments to growth, with 71% citing high interest rates.
The survey also suggested growing concern about risks of ‘overtourism’, with 28% saying they consider local resentment towards tourists a risk.
Deloitte found Paris and Madrid to be the second and third most attractive cities for hotel investment. with Amsterdam falling to fourth place, Rome fifth and Porto entering the ranking for the first time in 12th place.
Oxford was rated the second most attractive regional city for investment in the UK, with Manchester third and Birmingham rising three places to fifth.
Deloitte head of hospitality and leisure advisory Leila Jiwnani said: “London’s resilience as an attractive European destination for international travel as well as a gateway for business is evident, as hotel investors look to secure reliable assets and build portfolios.
“Edinburgh continues to sit at the top of our UK ranking as an attractive investment opportunity [and] a popular tourist destination.”
Jiwnani added: “M&A activity is picking up. We expect investors to favour the luxury end of the market in line with the growth in hotels offering premium experiences.”
She noted: “Private equity as a source of capital for hotel investment has risen 10 percentage-points over this year, demonstrating the increasing appetite for M&A in the sector.”
The survey was conducted between August 7 and September 17.