The number of dedicated hotel investment funds is expected to grow, as long-term investments in the hotel sector outperform the property market.

Hotel investments have outgrown the commercial sector by 32.5% during a 13-year period, according to a report by accountant PKF. Yet British life and pension funds – some of the most prominent investors in UK property – are not spending as much on hotel portfolios as other types of property.

The hotel market is traditionally volatile, and is quickly affected by events such as 9/11 and foot and mouth. Yet analysts expect that greater transparency and liquidity in the sector will attract increasing numbers of investment funds.

Indeed, PKF’s research predicts that the UK hotel sector will grow by almost 8% in the next two years.

Robert Barnard, head of hotel consultancy services at PKF, said: “In recent years the hotel transaction market has become more liquid with greater availability of larger assets and portfolios, and more transparent valuations than before.

“This is driving change within the investment community with the creation of dedicated hotel investment funds and, if the global economy remains relatively stable, I anticipate that trend to continue, which should increase investment in the asset class by institutions.”