Hotel prices still to peak, say experts

UK hotel property prices are yet to peak despite uncertainty caused by recent turbulence in the financial markets, according to industry experts.

Rising default rates on US home loans have triggered an increase in the cost of credit around the world, leading to a slowdown in house price growth in the UK.

Last week, a leading hotelier said this trend was also becoming evident in the hotel market, as he explained a deal to sell one of his properties.

Robert Peel, group chairman of Peel Hotels, said the £15.5m deal to sell the Avon Gorge hotel in Bristol was timely as it left the company debt-free at a time when the cost of borrowing was increasing as the value of property fell.

But Dominic Mayes, head of hotels at property agent Knight Frank, insisted prices had not peaked, and that there was plenty of room for growth.

"There's concern over the price of debt now, which is going to have an impact but there's still a reasonable amount of private equity out there which is driving the market," he said. "It's still a relatively aggressive market - there are more people out there who want to buy hotels than those who want to sell."

Michael Hirst, consultant at property agent CBRE Hotels, agreed that the demand was still there. "Some areas have possibly seen some easing in price but others remain very strong," he said. "There's still money chasing hotels, even though credit is still difficult to get."

By Daniel Thomas

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