London and Edinburgh Lead the Charge in Hotel Investment for 2026

London and Edinburgh have once again cemented their status as the places to be for hotel investors, according to Deloitte’s newly released 2025 European Hotel Industry and Investment survey. The findings confirm what many in the market have felt for some time: capital is still highly attracted to the UK, but the bar for performance and profitability is rising fast.

Below are our key INNsights from the report and what they mean in practice for owners, investors and operators.

London and Edinburgh stay at the top of the investor wishlist

Deloitte’s survey of 100 senior hospitality executives again places London at the top of the European hotel investment league table for the year ahead, for the third consecutive year. Edinburgh retains its position as the most attractive regional UK city for the fifth year in a row, ranked most attractive by more than half of respondents.

This tells us a few important things about the current cycle:

• London continues to offer global appeal
  A mix of strong corporate demand, enduring leisure appeal, and a deep talent and capital pool keeps London in pole position. Even with cost pressures and geopolitical uncertainty, investors are clearly confident in the capital’s ability to generate long-term value.
• Edinburgh’s regional leadership is no accident
  Edinburgh’s fifth consecutive year at the top of the UK regional ranking reflects its blend of year round events, tourism, culture and growing international air connectivity. The city is also attracting a high share of Scottish hotel investment transactions, underlining its status as a strategic market rather than a niche play.

 

For InnPractice, this is aligned with what we are seeing on the ground. Well-positioned assets in both markets are attracting strong interest, provided the underlying story on product, location and operations is compelling.

Strong long-term sentiment, but profitability concerns are rising

The Deloitte survey paints a broadly positive picture for the sector:

• 84 percent of hospitality leaders are optimistic about the long term future of the UK and European hotel market.
• 79 percent expect investment into the hotel sector to materially grow over the next five years.

At the same time, the report highlights a more cautious view on profitability:

• Fewer than half of respondents believe hotels in the UK and Europe will be more profitable in five years than they are today.
• Managing profitability has risen sharply up the risk agenda, behind only labour and workforce challenges and geopolitical tensions.
• Managing or increasing profitability has become the top business priority for 84 percent of respondents, ahead of cash flow and inflation.

 

In simple terms, the money is there and the appetite is real, but it is no longer enough to rely on market momentum or asset inflation. Returns will have to be earned through sharper strategies and stronger execution.

A stretched middle and a polarising market

One of the more interesting themes in the survey is the shift in investor focus across segments:

• Hotels remain the most attractive hospitality asset class for 2026.
• Luxury is identified as the most desirable segment, with 39 percent of respondents favouring it.
• Upper upscale and economy are tied in second place at 16 percent each.
• Traditional mid market segments, including upscale and upper midscale, have lost some relative appeal.

 

For owners and investors, this polarisation has practical implications:

• For luxury and upper upscale assets, the opportunity lies in deepening experience, personalisation and brand equity to justify rate and protect margins.
• For economy assets, the priority is operational efficiency, smart use of technology and a compelling value proposition that resonates with increasingly price sensitive guests.
• For mid-market hotels, the challenge is to avoid being squeezed from both ends, either by repositioning or by sharpening the proposition for a clearer target guest.

Diversification, experience and ROI

With profitability at the top of the agenda, Deloitte’s survey highlights how leaders are responding:

• Pressure on profit margins and the need to improve return on investment are the main drivers of diversification strategies.
• Increased consumer demand for unique experiences and personalisation is the next key driver.
• Around a quarter of organisations have already developed new hotel concepts or added brands at different price points as part of their strategy.

 

This chimes with what we see across both London and Edinburgh. Owners are asking more frequently:

• Does our current product and brand still match the guest we want to serve
• Are we clear about where we sit on the value to luxury spectrum
• Is our operating model set up to deliver the level of experience our positioning promises

 

Those that can move decisively on these questions are far better placed to capture the next wave of demand and to stand out when competition intensifies in 2026 and beyond.

What this means for hotel owners and investors

 

Bringing these findings together, a few themes emerge for anyone active in London, Edinburgh or wider UK markets:

 

1. Location still matters, but story matters more
   Being in a top market like London or Edinburgh gives you a strong starting point. However, buyers are now looking closely at the asset story: guest mix, brand fit, capex history, ESG strategy and revenue diversification.
2. Profitability is the new battleground
   With labour and cost pressures here to stay for the foreseeable future, the focus needs to shift from simple revenue growth to profit quality. That means targeted investment in systems, people and guest journey design rather than blanket cost cutting.
3. Clarity of positioning is essential
   In a market where investors are gravitating to both value and luxury, sitting vaguely in the middle is increasingly risky. Clear positioning, anchored in guest insight and operational reality, will be key.
4. Execution will separate winners from also rans
   In the current environment, winning assets will be those that align product, people and guest experience in a way that supports stronger, more resilient returns over time.

 

How InnPractice can help

At InnPractice, we work with hotel owners, investors and operators to translate this kind of market insight into practical action on the ground.

Whether you are:

• Considering an acquisition in the UK
• Repositioning an existing hotel to better match demand
• Looking to improve profitability without compromising the guest experience

Our team can help you refine your strategy, sharpen your positioning and support the delivery of change inside the business.

Contact us today to explore how we can build a successful partnership together.