Owners are expected to cash in on the on-going growth in the performance of UK hotels by selling their increasingly prime assets during 2015, according to new research published today.
The Hotel Bulletin: Q4 2014, drawn up by AM:PM, HVS and Zolfo Cooper, states that although demand is expected to grow, there are early signs that the market is beginning to mature.
"Certain investors may prefer to sell in a growing marker rather than try to call the top," said the report. "This is likely to be particularly relevant for investors who bought during the downturn and have already satisfied requirements."
Strong revpar (revenue per available room) growth throughout 2014 helps explain the buoyant transaction market in the latter half of the year, with notable transactions including the acquisition by KSL Capital Partners of 25 De Vere Village Urban Resorts for around £480m - £30m above the asking price - after a heavily contested auction process.
While £0.4bn of the total £1.1bn of acquisitions during the fourth quarter of the year was accounted for by single asset sales, the situation is expected to change this year as there have already been several portfolio transactions. These include Topland's purchase of the Feathers Group, Starwood Capital buying the Townhouse Collection and Lone Star's acquisition of Moorfield's legacy fund assets and Jurys Inn.
Among the many hotel portfolios already being actively marketed this year are Jupiter, Malmaison/Hotel du Vin, Starwood Capital's non-core estate and LRG2.
"Valuations of hotels are increasing as a result of increasing profitability and demand for quality assets that is outstripping supply," said the report.
"While this trend is almost universal in larger regional city centres, there is scope for valuation increases in secondary and tertiary locations as investors are forced to look further afield for opportunities."
In conclusion, Rusell Kett of HVS said that the outcome of the General Election in May could "provide an additional stimulus to investors' confidence".