UK hotel property prices could fall by as much as 20%

04 September 2008
UK hotel property prices could fall by as much as 20%

Hotel property valuations in the UK could fall by as much as 20% because of the economic downturn, experts have predicted.

The warning came after it emerged that Marylebone Warwick Balfour has lowered last year's £700m asking price for Malmaison and Hotel du Vin to £650m.

Industry watchers said that, although transactions have been thin on the ground this year, hoteliers will be forced to make price corrections of between 10% and 20% in the coming months if they wish to sell.

Robert Milburn, partner and leader of hospitality and leisure at PricewaterhouseCoopers, said: "There are relatively few transactions compared with previous years but if any deals are made the price will be significantly lower than 12-14 months ago," he said. "It varies by property, but I wouldn't be surprised if we saw a 15-20% reduction."

Tim Helliwell, head of hotel finance at Barclays Bank, agreed. "Prices have come down by 10-20% especially on large transactions, but there needs to be more sales activity to get a clearer picture," he said.

James Devitt, a valuer at property agent CBRE Hotels, warned that if anyone thought the devaluation of hotels was less than 15 to 20%, they were "kidding themselves".

Jon Hubbard, managing director for north Europe at property agent Jones Lang La Salle Hotels, said that hoteliers were not openly marketing assets because of the current state of the economy.

But Duncan Poole, senior surveyor at CBRE Hotels, said some businesses might be forced to sell. "As hotels are performing pretty well, few people feel under pressure to sell assets," he said. "Once we see a drop in trading, the pressure to sell will increase."

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Starwood Capital says hotel sale rumours are "hogwash" >>

Malmaison and Hotel du Vin losses increase >>

The Real Hotel Company reports loss of £1.5m >>

By Gemma Sharkey

E-mail your comments to Gemma Sharkey here.

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