A near record year for UK hotel transactions in 2015 is expected to be followed by another busy year in the sector with a number of major deals in the offering, predicts property agent Christie & Co in its annual Business Outlook.
Following the completion of around £9b worth of transactions last year, the regional UK market is again expected to be an attractive one for investors in 2016, with prices continuing to rise, although at a slower rate than recently.
Among the major hotel sales undertaken by Christie & Co last year were those of the 176-bedroom Radisson Blu Bristol, which was sold to an undisclosed overseas investor for more than its £21m guide price; the 151-bedroom Hotel Indigo Liverpool, acquired by MCAP Global Finance for more than £11m; and the 351-bedroom Arora Hotel Heathrow, sold to US hedge fund Davidson Kempner off a guide price of £45m.
Contracts have also been exchanged on the London Road Fire Station site in Manchester, which has stood empty for 30 years after a failure by its former owner Britannia Hotels to develop it as a 227-bedroom hotel. It is not known whether a hotel will form part of the development plans for the building by its new owner, property company Allied London.
Barrie Williams, managing director, hotels, Christie & Co, said that the make-up of hotel transactions in 2016 are expected to be similar to last year with larger groups selling off subsets of portfolios or individual properties.
"There will be continued interest from high net-worth individuals, institutional and overseas buyers. Asia investors, particularly those in China, where they have created a bubble, are looking to invest in what is regarded as a safe haven within the UK," he said. "Also, with the massive growth in number of tourists expected from China, there will be increased demand for travellers to stay in UK hotels which have an understanding of their culture."
Beyond China, Williams said he also expects to see interest in the UK hotel sector from Maylasia, Thailand, Singapore and Taiwan.
With PWC forecasting revenue per available room forecasts of 2.3% in London and 4.2% in the provinces, together with the sustained interest in UK hotels, Williams said he predicts prices "to continue to increase this year, albeit perhaps not at the same rate as 2015. Investor interest in the regional market will continue to be strong, while London, as always, will be of interest due to the freehold, ‘trophy' nature and safe haven status."
Looking ahead, Christie & Co will be bringing the 323-bedroom Gresham hotel in Dublin to market next month. "The hotel, which has permission for a 140-bedroom extension, provides a rebranding opportunity," added Williams.