Hotels: Christie & Co’s Business Outlook 2020 reports investor appetite for UK hotels remains strong
Despite a notable decline in both transactional volume and deal count, domestic and overseas investor appetite for the UK hotel market remains strong, according to the latest annual report by specialist business property advisor, Christie & Co.
The report, ‘Business Outlook 2020: Focus on Business’ reflects on the themes, activity and challenges of the previous year and forecasts what 2020 might bring across the sectors in which Christie & Co operates, including Hotels.
The report notes the sector responds well to changing investor requirements by adapting operating structures and evolving and innovating brands with technology. However, throughout 2019 Christie & Co observed the impact of large amounts of development and an ongoing increase in the supply of hotel rooms seen in recent years. Approximately 225 hotels are currently underway across the UK and regional cities such as Manchester, Glasgow and Bristol are expected to see double-digit growth in room supply by the end of 2022.
This, alongside the political and economic uncertainty influenced by Brexit, has contributed to mixed trading performance and notable drops in RevPAR in some regional markets. The report predicts oversupply, cost pressures and staffing issues are likely to further impact trading in 2020, particularly for underinvested assets outside city centres, threatened by new supply.
Nonetheless, it suggests the General Election outcome and renewed investor confidence should unlock the transactional market. Quality assets in markets with the right fundamentals will continue to see growth in 2020.
Average prices remained economically positive throughout 2019, with Hotels seeing a 0.5% increase.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
- Hotel operators are likely to experience continued pressure on profit margins, impacted by RevPAR declines, intensified competition and higher operational costs
- Capital expenditure will be top of the agenda for owners to maintain a competitive edge
- We anticipate an increase in distress positions for under-invested and/or poorly managed assets
- Deal flow for higher value assets and portfolios should unlock in 2020 as uncertainty around Brexit eases
Carine Bonnejean, Managing Director – Hospitality Consultancy at Christie & Co comments, “Our sentiment is positive for the year to come. In the first few days of this new year, we have already seen renewed confidence in the UK hotel market with new sales instructions to be launched in the coming weeks and overseas investors engaging with us to source deals. Hotels can deliver great returns for a wide range of investors and despite supply and cost challenges, quality opportunities with value-add potential will always attract strong interest.”