Hotel investment experiences post-recession high

Reporting on new data by Savills, Property Week announced that investment in the UK hotel market hit a post-recession high last year of £6.1bn – the highest since 2006.

Regional markets

Richard Carr Hotel Investment image

Will the hotel investment boom continue in the UK?

Activity wasn’t just high in the capital though, with 71% of deals taking place outside of London as confidence in the regional markets flooded back.

In 2013, Middle East investors had been most active in the market, however last year it was US investors who were busiest. Investors from the States doubled the amount they spent in the UK last year, taking them past the £2.1bn mark.

In total, overseas investors accounted for £2.9bn (47%) of total volumes, which was an increase of 14.1% on 2013.

Investment from Asia and the Pacific also rose considerably by 65%, with the largest deal costing £135m for the purchase of Wentworth Golf Club by the Chinese Reignwood Group.

Growth expected in 2015

Following on from an impressive 2014, Savills reported that there were “unprecedented amounts of capital looking to enter the market”. In total, there is an estimated £2bn work of portfolios currently on the market, including:

  • Chapter Hotels
  • Jupiter Hotels
  • Principal Hayley & De Vere Venues
  • LRG2
  • Malmaison Hotel du Vin
  • Grosvenor House

However, there has already been some major deals gone through within the first four months of 2015.

  • Westminster St Ermin’s Hotel – bought by Sunrider Group for £185m
  • Ace Hotel Shoreditch – bought by Deerbrook Group for approximately £150m
  • Hilton, Newcastle, Gateshead – bought by USS for £37.7m

Why is investment on the rise?

Investment in commercial property in general has risen, however hotels specifically have seen a big boost. For foreign investors the return on capital is often greater on hotels, which are now far better presented than they have been.

Other reasons for increased investments include: well-maintained assets, attractive lease terms and excellent locations.

Opportunities for developers

Richard Carr believes that this is good news for all, but that it might all be brought to a halt if Red Ed (Miliband) and his gang gain power in May – let’s hope not! On a non-political point it’s great news all round that there is so much investment being ploughed into tourism and new bed space stock.