Why Investors Are Increasingly Backing British Hotels

By Giles Fuchs, Owner and Co-Managing Director of Burgh Island Hotel and The Pilchard Inn

After years of disruption and recalibration, Britain’s hospitality sector is entering a phase of strategic renewal. Despite recent Budget changes that will likely increase the rates bill for many small hospitality businesses and increasing talk of a national tourist tax, investor confidence is gradually returning. It is driven by largely improving fundamentals, a shift towards more sustainable operations and a more positive outlook. Yet sentiment and market-wide factors on their own will not drive the industry’s recovery, it will hinge more on hoteliers’ disciplined management and their ability to adapt to a changing investment landscape.

A legacy worth protecting
Hotels occupy a distinctive place in the British economy and built environment. From The Savoy in London to The Grand in Brighton, and independent landmarks such as The Pilchard Inn on Burgh Island, they represent living heritage that fuels both tourism and regional regeneration. Investing in these properties reflects confidence in an asset class that has demonstrated resilience through successive economic cycles.

During periods of economic uncertainty, hotels are often cited as vulnerable to wider market pressures. Yet the recovery data tells a more nuanced story. A recent 2025 report from CoStar presented at the International Hospitality Investment Forum confirmed that UK hotel occupancy had returned to 100 per cent of 2019 levels as of February 2025, while a 2025 British Council for Offices report authored by Nigel Oseland shows that office utilisation has stabilised at around 66 per cent of its previous benchmark. This contrast highlights how well-positioned hotel assets, whether urban or coastal, tend to rebound more quickly once confidence returns, reflecting their dual economic and social importance within local economies.

Business case for hospitality
While the UK hotel market has steadied, what defines investor behaviour today is how capital is being deployed. According to a recent Savills report, UK hotel investment reached £5.75 billion in 2024, more than double the total recorded in 2023, reflecting sustained investor confidence in the sector. Capital is returning, but it is selective: lenders are rewarding credible ESG capex, and resilient domestic leisure is supporting rate growth.

Boutique and independent hotels continue to drive the market, benefiting from guests seeking distinctive, place-led experiences.

London’s luxury hotels continue to grapple with profit margins despite commanding high room rates, a reminder that scale alone doesn’t guarantee returns. Meanwhile, smaller independents that prioritise authenticity and operational efficiency are increasingly attracting investor interest.

Institutional capital is cautiously re-entering the sector, while private equity and family offices remain active, attracted by the balance between stable income and long-term appreciation.

Hotels remain among the few real estate classes capable of delivering both immediate yield and enduring capital growth.

Many owners have refinanced at higher rates or restructured balance sheets to free capital for refurbishment and ESG upgrades. These shifts are creating a market that rewards operators who understand that disciplined investment today builds defensible value tomorrow.

Sustainability is a sound strategy
Sustainability isn’t a brand exercise; it’s become a balance sheet imperative. Running a hotel today requires more than meeting guest expectations; it demands strategic sustainability that enhances profitability. Many heritage hotels are adopting renewable energy, improving staff accommodation, and strengthening links with local suppliers. These efforts typically improve efficiency and retention, reinforcing the long-term value of such assets. These outcomes translate directly into stronger margins and greater long-term stability.

Across the sector, sustainability has moved from ethical consideration to financial imperative. Green certifications and ESG credentials now influence lending terms and asset valuation, while operators that invest in efficiency enjoy lower overheads and stronger cashflow. Investors who prioritise environmental and social governance are, in effect, securing the longevity and liquidity of their portfolios. For operators prepared to make these commitments, the commercial case has never been clearer.

Heritage and innovation work well together
Heritage assets deliver when properly managed. At Burgh Island, we took occupancy from 52% to 78% not by abandoning the Art Deco authenticity but by investing in it, restoring 2,500 panels in the Palm Court dome, upgrading infrastructure while preserving Crittall windows, sourcing locally, and backing it all with professional operations. The asset’s distinctiveness is precisely what commands premium rates and repeat bookings.

Independent revivals like The Pig demonstrate this principle at scale. What began as a single property in Brockenhurst in 2011 attracted private equity acquisition by KSL Capital Partners in 2022, proving that design-led restoration rooted in place creates assets institutional investors want to own. These examples demonstrate how cultural authenticity and operational rigour create resilient, profitable hospitality ventures with distinctive brand identity. The market increasingly rewards differentiation anchored in story and scarcity. Guests want experiences rooted in place; investors recognise that such uniqueness commands a premium. Heritage backed by sound operations becomes competitive advantage. These buildings aren’t museums, they’re working assets with foundations with better bones than anything you could commission today.

Investing in Britain’s hospitality future
Hospitality contributes over £90 billion annually to the UK economy and supports 3.5 million jobs, making it the third-largest employer in the country. But its real significance lies in its ability to regenerate towns and sustain employment, while reinforcing Britain’s global reputation for service and culture.

Every investment, from refurbishing a listed hotel to developing a contemporary coastal retreat strengthens local supply chains and community infrastructure, supporting long-term economic resilience.

As the sector enters 2026, heritage-led assets with verified ESG performance are positioned to outperform. While other commercial property classes face uncertainty, hotels demonstrated resilience through 2025, with yields stabilising and transaction activity returning to healthy levels. Constrained supply, lender preference for operators with credible sustainability credentials, and the sector’s proven ability to reprice against inflation continue to attract capital.

PwC’s 2026 forecast confirms that targeted investment in energy efficiency and environmental reporting now delivers both cost reduction and enhanced investor appeal, sustainability has become commercially imperative, not optional.

The market has moved past recovery; this is selective expansion. Operators prepared to invest in heritage, execute credible ESG programmes, and back quality over volume will find returns that other asset classes struggle to match. The buildings exist. Demand is proven. The difference now comes down to who’s willing to back their conviction properly.