London has topped this year's European hotel investment league as the overall number of transactions across the Continent has dropped by 16%.
While a lack of available debt continues to dampen the market in Europe, single asset transactions and the sale of development sites have boosted business in London in what is otherwise a depressed hotel investment market.
The scarcity of debt and economic uncertainty will continue to dampen investment until at least the end of 2012, according to hotel consultancy HVS.
The company's latest hotel transaction figures, released to coincide with this week's Hotel Investment Conference Europe in London, show that investment in both single assets and hotel portfolios during 2012 has been significantly down on 2011 levels.
"Trading has been difficult in recent months for many European markets: even Paris and London have experienced a slowdown," said Tim Smith, director at HVS London.
The first eight months of 2012 saw hotel investment activity in Europe total around £2.8b, a 16% decline on the same period in 2011.
Some 46 hotels (around 9,500 bedrooms) were sold - each for more than £6m, 28% below the same period in 2011 when 59 like-for-like transactions took place. Total single asset investment volume reached £1.68b in the first eight months of 2012, a 10% decline on 2011.
The average sale price per room was £172,000, compared with £208,000 in 2011.
As in 2011, the majority of investment has been based in the UK, where volume of sales reached more than £800m. In London some 12 hotels changed hands, including the four-star Cavendish London for just under £160m.
A number of hotel development sites have also been sold in London, including the InterContinental Westminster, Hilton Bankside and the Odeon site in Leicester Square acquired by the Edwardian Group.
A total of nine portfolio transactions involving 29 hotels have taken place in the first eight months of 2012, reaching a volume of £1.2b. This represents a 22% decrease compared with the same period in 2011.
Transactions this year have included the acquisition of six hotels from investment vehicle aAim by Principal Hayley for £200m. This was £75m less than the sum Principal Hayley sold the portfolio to aAim for during the property boom in 2006. Principal Hayley went on to sell these properties for £90m in a sale-and-leaseback agreement with Pramerica. The whole Principal Hayley portfolio, consisting of 22 hotels (3,700 bedrooms), has been placed on the market for £500m.
"Until debt becomes more readily available and trading significantly improves, it is difficult to estimate when the hotel investment market will improve but we hope to see transaction figures rising during 2013," added Smith.
By Janet Harmer
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