The hospitality boom: Why investors want hotels again

US private equity giants drove a resurgence of hotel investment in 2024, checking into large portfolios of hotel properties across Europe, after the more challenging period the year before.

A mile or so across the park from the London Business School, for example, the Marriott Hotel Regent’s Park changed hands as part of a 33-hotel portfolio, which a joint venture of KKR and US hedge fund Baupost Group bought from the Abu Dhabi Investment Authority for £900 million. KKR rival Blackstone Group acquired another 33- property portfolio, Village Hotels, from KSL Capital Partners for a reported £850 million.

Last year was a “return to form,” Savills Director, Hotel Capital Markets James Greenslade, told the IEPC’s Private Capital Symposium at London Business School, with £5.75 billion of transactions in the UK, up about 20% on the 10-year average, and about €22 billion of transactions in Europe. In Europe, he added, the value of transactions was a five-year high.

And while US players were not the only ones in the market, they did account for £2.7 billion – or just under half - of the value in the UK alone. Addressing the specialist panel, Spotlight on Hotels as an Asset Class: Strategic Investment Trends for Private Capital in Europe, James said about 25% of the European total was attributed to just five firms, KKR, Blackstone, Starwood, Oaktree and Baupost.

Fellow guests on the panel were Tom Boszko, Deputy Managing Partner at Alchemy Special Opportunities LLP and Saydam Salaheddin, Global Head of Real Estate Lending, Deutsche Bank - Private Bank. The panel was moderated by Marie Bates, partner at law firm Farrer & Co.

Predominance of portfolio deals

Giving context to the predominance of portfolio deals, Saydam said few individual high-end hotels were changing hands. In part, this was because hospitality was booming in the post-Covid era, and wealthy owners were reluctant to sell if a hotel was doing well. “They will sell if someone comes in and offers something silly…,” he said, but “transactions of big hotels between moneyed families, we don’t see very much of at the moment.”

Saydam said that, as a lender, he was not solely transaction driven, but could refinance assets that his clients already owned. He would often provide the capital to “redevelop things that need to find new life,” as consumer tastes and requirements changed and new types of hospitality were needed in new locations. There was, he said, “a proliferation of different hospitality types,” such as pod-hotels, or wellness resorts now coming into vogue, that needed significant investment to cater for. There were new opportunities to extend seasons, to take a hotel in the mountains that was open five months a year for the ski season and turn it into a destination open twelve months a year; to open restaurants in hotels that were attractions in their own right and so forth, all of which required investment. Existing chains were also expanding their offerings and dividing their hotels among different brands to cater for different tastes.

The new strategies were attracting private equity interest too, according to James, who talked of investments in “hotel-adjacent” categories such as hostels and extended-stay accommodation that were able to “protect margin with a lower cost base.” He gave the examples of Brookfield Asset Management that as recently as May 2025 acquired Generator Group’s portfolio of 15 European hostels from UK private equity house Queensgate Investments for €776 million; and London-headquartered Tristan Capital’s agreed acquisition of budget operator EasyHotel from EasyGroup and founder Sir Stelios Haji-Ioannou.

Consolidation in fragmented markets

But for Alchemy’s Tom, it was neither the upmarket boutique nor the low-end budget brand that was of interest, but the opportunity provided by consolidation in Europe’s fragmented market. There were opportunities all over Europe, including the UK, to buy and build, creating a platform from a single business, too small to invest in economically on its own, and adding other single properties to create a bigger more saleable operator. His favourite statistic, he said, was that in Italy there were 36,000 hotels owned by 35,000 different people.

Across Europe, there were many individual hotel owners, often in their seventies, with properties that required a lot of investment to bring them up to modern standards and requirements, whose families were uninterested in carrying on the business and were ready to sell. Yet the “typical private equity real estate investor,” would look for big simple assets, that were easy to scale, well-invested and relatively simple to operate.

“We’re not typical investors,” he said.

Instead, as a value investor, Alchemy was looking for opportunities that were too granular, too complex and didn’t fit into a category that was easily marketed to mainstream private equity limited partners. Alchemy might buy up a single property, for, say, £3 million. It might sometimes invest as much as the same amount again in capex, a commitment that the departing owner would not be able to make. Then, as part of a larger platform, it would transform it into something much more desirable.

Tom cited an example in the UK, where Alchemy recently built a group with 31 assets from 26 separate transactions.

Sustainability concerns and regulatory pressure

While there was little institutional interest in buying small problematic assets, there was a lot of interest in buying assets that had been “polished.” In real estate, he said, “if you build something good, you’ll find a buyer.”

Saydam also told panel moderator Marie that sustainability concerns were gradually “creeping into the hospitality sector.”

For the moment, he agreed with both Tom and James, that sustainability was low down on the list of priorities that either hotel guests or hotel investors were looking at, but that would eventually change and would most-likely be forced upon the industry by regulators, such as the European Central Bank, which oversaw lenders and financial institutions.

“The ECB grills us on that. It wants to know what proportion of our loans to real estate are green, and why are not more…,” Saydam said. “Eventually we will have to differentiate the cost of capital to non-sustainable assets. And if that’s our largest asset segment, it will hit hotels at some point.”

For now, most guests were not yet ready to pay a premium for sustainable hotel stays, except at the high-end luxury segment, where people were moving into “eco-resorts” and wellness hotels. It would add to costs in an industry where margins are already very thin and it would be hard to implement strict environmental standards in old, listed buildings or properties in the countryside.

“But it is coming in,” warned Saydam. “And our clients are asking about it, because they know that, at some point down the road, it will happen.”

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