UK hotels are expected to experience further consolidation in the three- and four-star sector, with a change of ownership of some groups on the horizon, according to global hotel valuation and consultation business HVS London.
"Several hotel groups have now got a for-sale notice on them, and more are likely to in the near future," said Russell Kett, chairman of HVS. "The banks are now confident enough in the market to consider a sale likely, and are putting groups on the market that other operators and investors are likely to look at."
"The mid-market is a difficult sector to operate in: cash-pressed consumers tend to trade down, squeezing the mid-market, particularly those hotels which are not clearly branded," he added.
Kett said that Principal-Hayley had now been put up for sale, with a price tag of £500m and suggested that the group could be acquired by a private-equity company that would use it as a consolidation vehicle.
Meanwhile, he pointed to the De Vere Group, which is selling off its non-core hotels and revamping its Village Hotels chain, with a view to selling off the business two or three years down the line. The group is also investing £4m-£5m in the Grand Hotel in Brighton, which Kett believes will possibly then be sold.
Finally, Q Hotels is also selling six of its smaller hotels with a view to refinancing in the near future, and the heavily indebted Jurys Inns is about to be sold to a private equity backer.
"These companies could provide an interesting opportunity for an investor to gain a foothold in the provincial UK mid-market, but there are additional possibilities for an investor with deeper pockets (possibly an existing hotel investor) to purchase, say, two or more of these groups. It could then carry out some overdue capital expenditure and then apply a more distinctive and recognisable brand to those which ‘fit', dispose of those which don't, and derive additional bottom line earnings and value from the economies of scale and branding benefits," Kett added.
"But the investment required to do this is significant and the timescale over which to accomplish this will be longer than most financial buyers will accept, so this might open the door for certain Asian investors whose investment horizons are significantly longer," he concluded.
By Janet Harmer
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