The first quarter of 2018 saw UK hotel investment volumes reach €1.85b (£1.62b), a surge of 81% year-on-year.
This continues the trend evident over the past 12 months, according to global real estate advisor CBRE.
Growth in the UK was driven by several significant nationwide hotel portfolio deals in Q1 2018, including the £135m sale of seven Hilton hotels to US-based Starwood Capital Group and the sale of the Grove London Travelodge portfolio for £72.3m.
Despite continued high investor demand, overall European hotel investment volumes slowed over Q1 2018 with investment volumes for the quarter totalling €4.02b, representing a 9% decrease compared to Q1 2017. This has been largely due to a shortage of hotel assets for sale in some highly sought-after markets which suppressed deal activity in Q1 as opposed to a lack of buyers.
Kristen Kozlowski, senior director at CBRE Hotels, said: "While a shortage of stock has caused a slowdown in overall European hotel deal activity, continued investor demand is generally holding hotel yields at a three-year low.
"Notwithstanding the impact of the future interest rates rises, appetite in the fixed-income and long-leased space in the UK and Germany could compress yields further in the short-term and is fuelling investment in secondary markets."
Pictured: Hilton Edinburgh Grosvenor