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Deals were down in Q1, but that doesn’t reflect the true value of the travel market. Nicola Sartori discusses the key trends and transactions from the last few months.
The desire to avoid increases in capital gains tax announced in the October Budget pulled deals forward into Q4 and impacted travel’s Q1 2025 completions – something I’ve seen across most sectors – with volume of completed deals down on the previous quarter. I don’t consider this indicative of the outlook for the remainder of the year though.
The travel sector wasn’t hit directly by the changes around US trade policy in April in the same way as some other sectors, but the decision to postpone the sale of Audley Travel because of the economic uncertainty the change in tariffs created shows that no sector is shielded from these concerns.
The deals that have completed show the sector is still very active, with a fairly even split between trade and private equity (PE), however, due to the impact of the Budget, the majority of completions in this quarter have been in hotels, rather than travel operators.
Q1 2025 deal volume was down 26% on the previous quarter but only 5.5% on the same quarter last year. The figures for PE investment were almost identical: 27% down quarter on quarter but no change on Q1 2024. This shows the impact of the accelerated completion schedule on this quarter.
Source: Mergermarket and trade press
Source: Mergermarket and trade press
The balance between trade and PE deals shows a levelling up for the former after several quarters dominated by PE. The PE-activity in this quarter was characterised by a mixture of PE-backed acquisitions, minority investments, and funding rounds. The majority of other investments were in hotel groups or properties.
Investment in the UK by foreign entities was down significantly on Q4 2024. Two (12% of all deals) were UK investments by overseas acquirors (Switzerland and the USA). There were eight (33.3%) in the previous quarter.
Foreign investments by UK-based entities were up quarter on quarter, with five (29% of all deals) across Hong Kong, Italy, and Spain.
There were 10 domestic deals (59%), which is up on the two previous quarters by 50% and 45% respectively.
There was a 59/41% split in deals between hotels and travel companies. Student accommodation and holiday lets included some notable deals: Invel Real Estate acquired a stake in YS Holding Srl (an Italy-based backpackers hybrid hospitality operator) and Sapphire Holidays acquired the Cornwall-based Grandeur Property Management.
A consistent trend is the continued acquisition of specialist operators by other companies in their market; for example, Golf Holidays Direct Ltd’s purchase by Sports Tours International Ltd.
Another interesting deal was Attraction Ticket’s transition into an employee ownership structure. Employee ownership is becoming an increasingly popular exit route as an alternative to traditional trade and PE deals, and is a small but growing part of the sector’s M&A activity.
The UK hotel investment market saw modest activity in Q1 2025, with a slight uptick in deal volume compared to the previous quarter. While performance metrics were subdued, investor interest, particularly in single-asset opportunities, continued to support transaction momentum.
The average revenue per available room, (known as RevPAR) in Q1 was down approximately 0.8% year-on-year1. Like other businesses, many hotel owners and managers are dealing with the reality of higher costs, particularly payroll and lower business rates relief. It remains to be seen whether the sector can achieve sufficient room rate growth to cover these increases in the rest of the year.
Adding to these pressures, the UK Government’s May 2025 immigration white paper – introducing higher skill and salary thresholds for overseas workers and abolishing the immigration salary list – is expected to further challenge hospitality employers already grappling with labour shortages, particularly in lower-skilled roles traditionally filled by international staff.
I expect to see pockets of distress throughout the year, particularly for independent, under-capitalised or over-leveraged single assets or small portfolios.
Overall however, I expect the positive sentiment and momentum for hotel transactions to continue in 2025, albeit there appears to be an air of caution in the market, partly due to geopolitical and macroeconomic uncertainties but also due to the impact of cost pressures on profitability. While headwinds remain, the resilience of investor appetite and the availability of capital suggest that it could still be a year of strategic repositioning and selective growth in the UK hotel sector.
1. STR; Grant Thornton analysis
The debt market’s ongoing resilience means that capital is available for good businesses with the right attributes.
Inflation is currently under control, and interest rates look likely to come down more quickly in 2025, which should help to increase the level at which lenders are willing to lend – making more funds available for transactions and for borrowers to raise. However, this needs to be reflected in monetary policy committee (MPC) s. They continue to be drawn to businesses backed by PE or institutional capital.
Lender appetite has improved compared what it was in 2024, with strong activity and some new market entrants emerging. Competition among them has been reflected in decreasing margins, particularly from debt funds over the past 12 months, signalling positive intent.
Information is still key to lenders – they need more data points and validation to prove those forecasts which the borrowers are proposing, and which are key to lenders’ credit analysis. This is a consequence of inflation and other macro-issues, including evolving assessments of the US government’s trade policy. These issues have yet to materially impact the market so I’m cautiously optimism about the outlook.
The group tour and fully independent travel (FIT) specialist has announced an agreement for its acquisition by Tour Partner Group. The deal, backed by Mayfair Equity Capital, will expand the range of services that Tour Party Group can offer its clients and create the largest destination management company in Europe.
A 100% stake in the brand and related intellectual property of the ‘urban lifestyle’ hotel franchise was acquired for total consideration of £250 million. The purchase will enable ‘Intercontinental’ to increase its appeal to modern travellers. The franchise model will continue, offering a flexible design concept to third-party hotel owners.
The Crazy Bear Group Limited operates hotels in Beaconsfield and Stadhampton with over 60 beds and multiple restaurants, including event spaces. “In January, Kevin Coates and Shane Smith from Grant Thornton we were appointed as administrators and the business and assets of both sites were sold to two of its directors on the same day.” All 147 employees were retained, and pre-paid deposits and vouchers were honoured.
This quarter’s deals included several focused-on software – showing that improving customer experience is a priority for the travel industry.
Vorwerk Direct Selling Ventures GmbH has sold the UK-based Tickitto Ai Ltd, developer of an AI-ticket assistant platform, to InteleTravel, the American holiday-planning adviser. The transaction provides an exit strategy for ‘Vorwerk’ and will enable Inteletravel to leverage increasing consumer spend on ‘eventcations’.
Two travel tech companies have announced substantial investments from PE funds.
The travel booking service received USD 100 million from the European fund, Vitruvian Partners. The company will use the capital to optimise its operations and improve customer experience via its partnership with Google Cloud.
The Barcelona-based travel management firm secured USD 200 million in its ‘series E’ fundraising from multiple backers: Kinnevik AB; General Catalyst Partners; Atomico (UK) Partners LLP; EQT Growth, and Noteus Partners SAS. It will use the funding to invest in AI and accelerate its expansion into the US market.
While activity in this quarter was lower, there’s clear momentum. The recent ATOL renewals have been published and show that expected passenger demand will continue to grow over the next 12 months, showing a resilience in consumer spending habits. With interest rates reducing, pent-up demand from buyers, and stakeholders looking to exit post-the pandemic recovery period there remains favourable underlying market fundamentals. However, I’m expecting that deals will continue to take longer than average to complete given the general feelings of economic uncertainty in the wider M&A market. More than ever, the critical success factor in M&A is timing, preparation, and a tailored process.
For more insight and guidance get in touch with Nicola Sartori.