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Positive outlook for hotel transactions following 17.2% increase in prices

16 January 2015 by
Positive outlook for hotel transactions following 17.2% increase in prices

An improved economy, availability of funds and forecasts of strong trading ahead helped drive average hotel property prices up by 17.2% during 2014.

A more buoyant hotel transaction market is good news for both operators and consumers, according to Chris Day, managing director of Christie + Co, which has announced the new figures in its Business Outlook 2015.

"New money coming into hotels from private equity companies, which have been behind many of the major transactions, is resulting in increased capital expenditure spending and improvements being carried out to properties which have been starved of investment for six to seven years," he explained.

"It means better quality hotels for the people working in them and for guests."

Demand was strong last year for both hotel portfolios and single asset properties, with London remaining a key focus for overseas investors and the regions increasingly being targeted as an area for investment.

The sale of a collection of 21 Holiday Inn hotels to Kew Green Holdings by LRG Holdings marked one of Christie + Co's major transactions during 2014. Meanwhile, the acquisition of the Lowry hotel, Manchester, by US-based Westmont Hospitality Group and its investment partner Mount Kellett Capital Management from Rocco Forte Hotels for a sum in excess of its £40m plus asking price highlighted the demand for quality assets

While much of the acquisitive action has been undertaken by overseas private equity funds, particularly from within the US and the Far East, there is increasingly the opportunity for individual operators to strike out on their own and purchase a property. Nick Baker, head of business mortgages at Christie + Co, said financial backing is now more readily available for budding entrepreneurs.

"If you are someone with extensive experience who is interested in acquiring a good quality property, you will get backing. Whereas two of three years ago you would struggle to find finance, you are now able to secure funds on the best possible terms as there will be several options open to you."

Baker said that as well as funding available from the traditional high street banks, such as HSBC, Lloyds Banking Group , Barclays and Royal Bank of Scotland, backing can also be secured from the likes of Ortus Secured Finance - a specialist in supporting investment in distressed properties, as well as "challenger" banks such as Cambridge & Counties and Shawbrook.

"Back in 2009-10, the load to value rate available was around 55-60%, now it is closer to 65-70%," added Baker.

Looking ahead to the next few months, Day said he expects that three major provincial hotel portfolios will come to market. Individual properties currently being marketed by Christie + Co include the Arora Hotel Heathrow for £45m; as well as the Basingstoke Country hotel (£5.5m) and Palace hotel, Buxton (£7m), both currently owned by the Hotel Collection.

Arora Hotel Heathrow goes on the market for £45m >>

Hotel Collection to offload two properties with price tag of more than £12.5m >>

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