Investment in the UK hotel sector in 2019 reached £6bn, an increase of 26%, according to the report ‘UK Hotel Capital Markets: Investment Review 2020’, published by Knight Frank.

However, hotel transaction volumes dropped by £1.2bn, representing a 3% decline compared to the five-year average.

Institutional investment in the UK hotel market, from both overseas and the UK, totalled £2.5bn in 2019, increasing by over a quarter and accounting for 41% of the total investment.  UK institutional investors accounted for £2bn of this.

Shaun Roy, head of hotels and specialist property investment at Knight Frank, said: “We have continued to see a strong demand for secure, long-term fixed income assets which has meant that despite uncertainty within the general investment market, investment into the hotel sector has remained strong, particularly driven by institutional investors.

“Both London and the regions continue to offer attractive propositions and returns for global and domestic investors, who recognise the growth prospects available, whilst significant opportunity exists for investors to take advantage of long-lease ground rents deals which continue to evolve and further strengthen the investment market.”

Roy adds that in 2020, Knight Frank predicts that there will be “more portfolios and higher value assets coming to market to capitalise on the growing appetite from UK and overseas investors.”

London accounted for £2.7bn of hotel investment in 2019 while its market share increased to 43%. This represented an 11% year-on-year decline, although the level of investment is equal to the capital’s five-year average investment volume.