Almost a third (31 per cent) of respondents ranked the capital as the best city for investment in 2016, despite over half considering it ‘overvalued’.
Around 2,500 luxury hotel rooms have been announced as opening in the city by 2021, which Deloitte estimates will have an investment value in excess of £3bn.
Nick van Marken, global head of hospitality at Deloitte, described the city as a ‘stand-out’.
“When you consider all the other hotel projects, the total investment pouring into the city is phenomenal,” he said.
“Although some investors see the city as overvalued, London’s position as a proven destination for both business and leisure remains unparalleled.
“Investor appetite and its added status as a safe haven means we expect capital flows to remain strong.”
The city narrowly outranked Barcelona and Madrid – which were the first choice for 27 per cent of investors – as the top destination, followed by Amsterdam, which was favoured by 26 per cent.
Regions ramp up growth
Edinburgh (47 per cent) was named as the most attractive investment destination outside London, followed by a resurgent Manchester (40 per cent) and Glasgow (23 per cent).
Investors were optimistic about growth in the regional hotel market, with two-thirds of industry leaders expecting RevPAR to grow between three and five per cent in 2016.
However, there were concerns that rising staff costs and a lack of new hotel supply could limit next year's growth.
van Marken said: “Increasing labour costs are naturally of concern to UK hotel investors, particularly with hotel owners having to increase pensions contributions through auto enrolment, as well as deal with the introduction of the Living Wage scheduled for April next year.”
Despite this, over a third (34 per cent) of industry leaders expect to see price multiples of 12 times or more in the UK regions.
Deloitte surveyed over 80 senior owners, lenders, developers and investors in the hospitality sector for their views on trends set to shape the hospitality market in to 2016.