UK hotel transaction volumes reached £6.6b in 2018, up 25% on 2017.
This is according to property agent Savills, which said the amount is 75.7% up on the long-term average of £3.78b and has been driven by an active portfolio market and increased activity from overseas buyers.
Portfolios accounted for 53% of the annual investment volumes for 2018 at £3.5b over 21 deals. This is significantly up on the 16 portfolios traded in 2017 for a total of £1.5b. Of the top 10 portfolios that transacted in 2018, the average value stood at £332m, 123% higher than in 2017.
The increased transaction volumes in the sector were combined with larger portfolio sizes, the top 10 deals averaged 2,000 keys per portfolio – a 119% increase on 2017. Major deals included the sale by Starwood Capital of Principal to Covivio (formerly Foncière des Régions) and LRC Group’s acquisition of Lone Star’s Amaris Hospitality group.
Overseas investors increased their activity in the UK hotel sector, accounting for 54% of total transaction volumes, up 20.5% on 2017 to reach £3.3b in 2018. This is the second highest amount ever invested in the sector by the group, beaten only by 2015 volumes which reached £4.3b.
The top three countries that invested in the UK were Israel (£1.1b), France (£860m) and Canada (£420m). On average, international investors spent on average £76m per deal; 3.4 times more than domestic purchasers. UK purchasers accounted for the lion’s share of deal count at 75%, however this amounted to only 46% of volumes at £2.99b.
Tim Stoyle, head of UK hotels at Savills, said: “The investment of overseas capital into UK hotels is testament to the strength of the sector even when facing Brexit uncertainty. This is further echoed in the popularity of portfolios which accounted for the majority of volumes, pointing to a positive sentiment in the market, buoyed by strong occupancy levels from leisure visitors.”
Investment volumes into London accounted for £2.6b (39%) of the total with the rest of the UK registering £4b of investment (61%). Total UK deal count has remained largely in line with previous years at 231 compared to 230 in 2017 and 220 in 2016. Key single asset deals include the acquisition of the Hilton London Kensington for £260m by Cola Holdings and the sale of Manchester’s Midland hotel for £115m by Aprirose to Pandox.