Favourable conditions for overseas investors saw £3.4b invested in the UK hotel sector during 2016, £1b more than the 10 year average.
Property consultancy Knight Frank has predicted that foreign capital will continue to flood the domestic hotel market in both London and key regional cities, due to the weak value of sterling which is expected to drive a 4% increase in overseas tourism and more staycation holidays.
Julian Evans, head of healthcare and hotels, Knight Frank, said that "the strong economic fundamentals in 2017" are expected to further underpin investor confidence in the UK hotel property market.
"The bond markets are driving yield compression for hotel fixed income including ground rents where Knight Frank has sold record deals at approximately 2.3% net initial yield. A ground swell of cross border capital is searching for quality going concerns and fixed income.
"Therefore we anticipate that we will continue to see strong results as investors look for better returns on their investments and reassess their portfolio to incorporate more specialist property assets.
He added: "Momentum will continue across the industry as it responds to threats from technological disruption taking place in the sector, through further consolidation or long-term partnerships."
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