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


Investment in the UK hotel market is enjoying a major boost, and the boutique segment is emerging as the clear headline act. In Q3 2025, investment in the UK hotel sector reached around £1.04 billion, up about 28% year-on-year. This fast growth puts hotels ahead of offices, industrial and retail property in the commercial real-estate recovery.

What stands out is not the big portfolio acquisitions, but rather the appeal of smaller, character-rich, single-asset hotels. Over 90% of deals in the third quarter of this year were single-asset transactions, as high-net-worth individuals and private-equity investors target properties they can directly manage or influence. Boutique hotels are winning attention because they offer clearer cash-flows, inflation-hedged income streams (thanks to flexible daily-rates), better liquidity and more operational control than large portfolios.

London and the SouthWest leading the drive

Capital-wise, London remains strong. The city accounted for roughly £697 million of third quarter transaction volume, up around 42% from the same period last year. But the headline driver is the SouthWest of England, where deal volumes soared by approximately 360% to about £180 million. Staycations are a major factor here, with premium coastal getaways and heritage landscapes  attracting visitors and investors alike.

Regional diversification is increasingly visible as investors seek beyond London’s hotspots. Several analysts note that the shift toward interest-rate relief and easing inflation in the third quarter helped boost investor confidence in real assets. With fewer distressed sales and occupancies returning close to pre-pandemic levels, hotel assets are viewed as a resilient investment option.

Why Boutique Hotels Are Winning

The edge of boutique hotels lies in their authenticity. From unique design themes and highly personalised service to strong local roots, these properties deliver experiential value. That premium positioning allows them to command higher room rates and build repeat-guest loyalty — a key differentiator vs standardised chain hotels.

Operationally, boutique hotels benefit from their smaller scale. They have the flexibility to innovate faster—for example, by using dynamic pricing, automation, data-driven upselling and hybrid spaces (lobby by day, social venue by night).

These revenue streams help cushion rising wages and employment taxes. In the broader sector, average daily rates (ADR) and revenue per available room (RevPAR) in UK hotels are now reported as significantly above 2019 levels. With limited new supply in many regional markets, valuations are firming and competition remains manageable.

Domestic and Global Capital Flow

Another strong trend is investor profile diversification. Domestic buyers now account for around 45% of acquisitions, reflecting renewed confidence from UK-based capital. But the overseas interest is growing even faster: international investment into UK hotels climbed ten-fold year-on-year in some segments. Boutique and lifestyle hotels are especially attractive to overseas pension funds and asset managers seeking inflation-hedged income and lifestyle credentials.

Policy Tailwinds and Headwinds

On the policy front, smaller and heritage hotel assets stand to benefit from upcoming reforms. From April 2026, the UK government is replacing the existing two-tier business-rates system with five new bands based on property use and rateable value. Smaller boutique and heritage hotels are expected to see favourable cost relief, bolstering margins and boosting valuations.

However, the sector is not risk-free. High wage inflation (including national-insurance and minimum-wage increases), utility cost pressures and the potential for supply rebounds are all issues to monitor.

Performance-Backed and Resilient

In Q3 2025 there were few distressed sales in the hotel sector. Occupancy rates are now close to pre-pandemic levels and ADRs are edging higher. Operators continue to maintain solid cash-flows and the investment community is increasingly treating small hotel assets not as risky plays but as strategic real-asset positions.

Furthermore, broad-based research suggests that stronger operational performance is increasingly being driven by active management, ownership control and agility — factors where boutique hotels excel. hese assets can be repositioned or rebranded more quickly than large chain hotels.

Outlook: Safe Haven With An Upside

So where does this leave us as we head into 2026? The message is cautiously optimistic. For investors chasing tangible, income-producing assets, boutique hotels are emerging as one of the most dynamic corners of UK real estate. With steady travel demand, controlled supply, and savvy management teams innovating around cost and guest experience, the sector is well-positioned to prosper.

What seems likely:

  • A deepening of the single-asset boutique trend, with more capital chasing fewer available high-character assets.
  • Increasing regional market activity: beyond London, values in the South West, Scotland and coastal markets will continue to rise.
  • Greater weight on ESG, wellbeing, lifestyle credentials and technology integration as differentiators.
  • Continued inflow of global capital seeking inflation-hedged income assets, especially in boutique and lifestyle hotels.

In summary: The UK hotel investment revival is real — and the boutique segment is not just participating; it is stealing the show.