London retained its position as Europe's most attractive city for hotel investment in 2026, the third consecutive year it has topped the ranking, according to Deloitte's 2025 European Hotel Industry and Investment survey of 100 senior hospitality executives.

Hospitality owners, lenders, developers and investors ranked Madrid second and Athens third, with the Greek capital climbing seven places year-on-year. Rome and Milan fell to ninth and tenth, drops of four and three places respectively.

What is driving London's lead?

The capital has absorbed a cluster of high-profile luxury openings since 2023. Raffles London at the OWO and the Peninsula launched in 2023. The Emory and Mandarin Oriental Mayfair opened in 2024. The Chancery Rosewood debuted in 2025.

Momentum continues into 2026 with scheduled launches of Six Senses London, St Regis London, Waldorf Astoria London Admiralty Arch and Cambridge House from the Auberge Collection. The pipeline underpins investor confidence in room-rate growth and trading density, two metrics that drive deal pricing in central London.

Where does the UK rank beyond London?

Edinburgh was named the most attractive UK regional hotel investment destination for a fifth consecutive year, chosen by 54% of respondents. Cambridge, Oxford and Manchester rounded out the top tier of regional cities.

Nearly half of executives expect UK-wide RevPAR growth of between 1% and 3%. A higher proportion of respondents anticipated flat or negative RevPAR growth for both London and the regions than in the prior survey, a reflection of post-pandemic market stabilisation rather than a reversal.

How confident are investors in profitability?

Optimism is high on the long view and more cautious on near-term margins. 84% of respondents expressed confidence in the long-term future of UK and European hotels. Only 47% expect those markets to become more profitable over the next five years.

Hospitality leaders named their biggest risks for the year ahead:

• Labour and workforce challenges: 83%
• Geopolitical tension: 78%
• Managing profitability: 69%

74% of those surveyed expect competition for hotel acquisitions to increase in 2026, with hotels remaining the most attractive asset class within hospitality. Private equity retained its position as the dominant source of equity finance for European hotel deals, though participation slipped year-on-year.

Where is the capital flowing?

The luxury segment absorbed 39% of investor interest, followed by upper upscale at 16% and economy at 16%. The middle of the market showed clear underperformance, reinforcing a polarised deal environment.

Respondents' diversification strategies skewed geographic. 50% cited expansion into new geographies, 27% new hotel concepts and 24% new brands at different price points. Branded residences tripled in attractiveness compared with 2025, while student housing, co-living and hostels all saw notable drops.

What do advisers say?

Leila Jiwnani, head of hospitality advisory at Deloitte UK, said: "London has secured its position as the most desirable hotel investment destination for a third year running, carving out its reputation as a dynamic capital city for business and leisure travel. Edinburgh also continues to demonstrate its popularity as a tourism hotspot, while destinations across Europe see varying levels of interest."

Jiwnani added: "Investors will be looking for locations that attract a variety of visitors, particularly amidst changing consumer preferences, including a focus on either value or luxury."

Abhishek Jaiswal, real estate M&A partner at Deloitte, said: "The expectation of more competition for hotel assets going forward is a positive sign for the industry, with a focus on niche and value segments given the middle of the market is stretched. While hoteliers look at profitability as a priority, strategic growth will regain importance."

What happens next?

The 2026 deal calendar opens with the St Regis London and Waldorf Astoria London Admiralty Arch launches, both scheduled for mid-2026. Deloitte's next European Hotel Industry and Investment survey is expected to land in late autumn, with the 2026 fieldwork window likely opening after the summer trading season concludes.