LONDON — Labour Party budget challenges and global socioeconomic uncertainties prevail, but hoteliers in the United Kingdom and Europe have optimism in 2025 thanks to forward momentum around hotel deals and some bright spots strengthening hotel operating performance.
The last 12 months have seen opportunities and transactions for the hotel industry across Europe that hold it in good stead for the next 12, said speakers at the 20th Whitebridge New Year Hotel Investment Summit.
Nick Pattie, managing director of Whitebridge Hospitality, said 2024 was another good year for hotel operating performance “although there were some signs of a softening in demand toward the back end of the year.”
The two biggest cost stresses for the U.K. hotel industry continue to be labor and employer National Insurance contribution costs.
“Last year at this time, I commented that the minimum wage had increased 28% over the previous three years and predicted it would hit small businesses particularly hard … [but] that payroll costs per available room will increase by about 4.5% on average," he said.
Pattie said another increase in the U.K. minimum wage would come into effect in April. Reductions in energy costs and interest rates, though gradual, are bright spots, he added.
Transactions trends
Philip Camble, director of Whitebridge Hospitality, said hotel transactions picked up momentum in the U.K. and Europe in 2024, leading many to grow their optimism for continuing strength this year.
Camble said the U.K. saw the highest level of transaction volume in 2024, in part due to the November portfolio sale in which New York City-based KKR & Company and Boston-based Baupost Group acquiring a 33-hotel portfolio from the Abu Dhabi Investment Authority for £900 million ($1.1 billion). The hotels are all in the U.K. and each are Marriott International brands.
“Regional U.K. stomped into first place with some big numbers and some even bigger deals,” he said, referencing Travelodge's acquisition of 66 hotels from London-based real estate investment trust LXi REIT in early 2024.
Spain dropped down from pole position in 2023 to third in 2024, with France moving up one place to second. The largest deal there, Camble said, happened when French owner-operator Covivio acquired the final 8.3% of shares in its Covivio Hotels brand from Italian insurance firm Assicurazioni Generali.
“Perhaps Spain is running out of things to sell?” Camble joked. “The biggest deal [in Spain] was Santander’s acquisition of about 38% in two Meliâ [International] properties for around €200 million ($206 million).”
Across Europe, the volume of hotel transactions was the highest since 2019, “despite lots of political and economic uncertainty,” Camble said.
The biggest deal per key in 2024 was BLG Capital’s sale of the 36-villa Amanruya Bodrum in Turkey to an unnamed Turkish asset-management firm for approximately €72.8 million, or €2 million per key, Camble said.
A 'bonkers' year?
Politically, 2025 could be a “bonkers” year, Camble said, noting the potential impact of the incoming U.S. Trump administration, but he added 2024 would be judged probably no less “bonkers.”
Distress, especially in Italy and France, revealed itself by the end of the year. He added that acquisitions by sovereign wealth decreased notably in 2024, while acquisitions by hotel companies and operators increased notably, especially in Spain and Regional U.K.
“The profile of operating structures adopted post-acquisition remained largely unchanged [in 2024] with self-operations still the preferred approach to the benefit of hotel-management agreement,” he said.
“The proportion of leases fell again for the fifth year in a row. Clearly leases don’t make for such attractive investments at the moment, which is interesting given that it is a model that is supposed to guard against economic uncertainty,” he added.
Simon Price, partner of real estate and hospitality in the Middle East at legal firm Mayer Brown, said 2025 would see continued frustration from hotel owners over operating agreements. He said owner concerns are mounting and include rights of terminations, brand restrictions on how owners choose hotel operators and on financing terms, and the lack of flexibility and scope in delaying openings.
He added that the stress still seen in markets, as well as an increasing profundity of brands, has helped move the balance of power closer to owners, who are negotiating agreements that are friendlier to owners.
Another major indication of continued strong demand for the U.K. comes from passenger numbers into the country’s main airport, London Heathrow, Camble said.
“The airport in 2024 handled a record high 83.9 million passengers and is expected to break that record in 2025,” he said.