The UK confirmed its leading role within Europe, reaching transaction volumes of €6.2b (£5.3b) in 2018, up 14% on the previous year's €5.5b (£4.7b).
That is according to the annual European Hotel Transactions report published this week by HVS and its brokerage and investment services division HVS Hodges Ward Elliott.
London remains the leading European hotel transaction market with a total volume of around €2.1b (£1.8b), with Dublin ranking second totalling €610m (£525m).
Alexandre Rey, analyst with HVS Hodges Ward Elliott and co-author of the report, said: "Interest rates, staffing pressures and the UK's departure from the EU will all influence the transactions market in 2019. The hotel investment market in the UK will most certainly face a slower year, but the rest of Europe might benefit from this slowdown as investors will seek to deploy capital elsewhere."
European hotel transaction volumes reached €18.6b (£16b) in 2018, a decrease of 14% on the previous year, but still the fifth highest level recorded.
A total of 655 properties, averaging 156 rooms, changed hands in 2018 with the average price per key growing by 8% in 2018, reflecting the quality of the hotels that were sold, as well as a growth in values.
Report co-author Nicolas Auer, analyst with HVS Hodges Ward Elliott, said: "The European hotel investment market continues to show rising popularity as an alternative asset class due to its strong yields. While 2018 may have seen an overall decrease in transactions it was compared to an exceptional 2017.
"Continued revenue per available room (revpar) growth across most of Europe helped support transaction levels in 2018 and despite the uncertainty surrounding Brexit, interest from overseas investors in UK hotels has remained very strong, demonstrating confidence in the future of the UK hotel market."
The year saw single asset transaction volumes fall 23% on 2017 levels to a new value of €9.5b (£8.2b), representing 51% of the total transaction volume. Sales included 271 individual hotels amounting to over 45,000 rooms. Portfolio activity decreased on the previous year by just 3% to €9b (£7.7b), 49% of the total volume, with 58 transactions comprising over 380 hotels and over 56,000 rooms.
Reduced activity from Asian and European buyers was the main reason for the decrease, with high net worth individuals in particular decreasing their investment in hotels in 2018 to €116m (£100m), compared to €554m (£477m) in 2017.
Real estate investment trusts (REITs) demonstrated an increased appetite for hotels, up 9% in 2018 to a total buyer volume of some €1.7b (£1.5b) in 2018, compared with less than €1.6b (£1.4b) in 2017, while private equity firms provided the largest amount of capital by buyer type in 2018 at a value of €3.9b (£3.4b).Get The Caterer every week on your smartphone, tablet, or even in good old-fashioned hard copy (or all three!).