The UK hotel sector has witnessed transactions totalling almost £5b up to the end of September 2018, an increase of 27% on last year.
According to the latest research by global property adviser Knight Frank, portfolio activity has dominated hotel investment in the year to date, totalling £3.1b of investment. Regional portfolio investment transactions have totalled £2.2b, far outstripping London at £900m.
This has led to the average price per room sold outside of London to rise considerably, by more than 50%, to approximately £150,000 per room, with a larger proportion of corporate, full-service hotels transacting in the mid and upscale markets contributing to the rise.
Philippa Goldstein, hotel analyst at Knight Frank, commented: “The diverse range of portfolio sales is evidence of the demand sought for quality hotel stock. Furthermore, London in particular is benefitting from a growing number of long-term investors, with experience in the cyclical nature of the hotel market, who are using their confidence and know-how to invest in prestigious, quality single-asset hotels.
“The London hotel business remains buoyant, the continued devaluation of sterling and London’s established position as one of the world’s leading hotel markets continues to drive visitation to the city. Despite the average price per room transacting in London remaining static, equating to around £306,000 per key, investor confidence has shown little sign of abating, irrespective of Brexit and the weight of the new hotel supply entering the market.
“With a number of investment deals under offer and further portfolio and single asset activity expected to complete during the final quarter of 2018, we envisage hotel transaction volumes for the full year to rise by over 15%, with our full year forecast close to £6.5b.”
Major portfolios transactions completed in 2018 include the disposal by Starwood Capital of the 13-strong Principal Hotel Group, including two De Vere hotel assets, for £858m to Foncière des Régions, now known as Covivio; Lone Star’s exit from the UK hotel sector, with the disposal of its remaining Amaris hospitality portfolio and operating platform to LRC Europe for £600m; Apollo Global Management’s disposal of its 20-strong Holiday Inn and Crowne Plaza portfolio, netting some £742m; and Brookfield’s successful £430m acquisition of the SACO Group, representing the largest serviced apartment deal in the UK.
Pictured: The former Principal London hotel, now Kimpton Fitzroy London