The hotel market has been enjoying a stellar period as one of the few sectors to fully benefit from the response to the EU referendum, as the decline in sterling boosted leisure travel from Europe, the US and China; according to VisitBritain 39.9 million visitors to the UK spent more than £25bn in 2017 up 6.2% on 2016. A weaker pound also lifted the number of staycations, which drove up occupancy and RevPAR in London and UK holiday hotspots.
Due to sustained consumer demand, the market continues to grow with an estimated 19,000 additional rooms to become available in the UK over 2017/2018, according to AM:PM. This growth hasn’t gone unnoticed by investors, who are keen to capitalise on this increased supply and demand. In the first half of 2018, the team has advised on transactions involving an unparalleled variety of buyer types from across the globe, showing that international interest in the UK has not showed signs of slowing.
As the demand for quality, well-invested hotels remains high, so too does the competition to secure these businesses, with sales prices reflecting this. Big ticket transactions are becoming increasingly frequent, with investor appetite clearly geared towards more substantial deals.
Despite the growth of greater competition from alternative accommodation providers such as serviced apartments, hostels and aparthotels, there is still exceptional demand for traditional hotels.
Moving into the second half of the year, new openings in London should account for a further 9,000 rooms and the regions have enjoyed a healthy RevPAR increase of 1.5% in the first five months of this year.
Undoubtedly the sector will face trading challenges due to cost pressures including staff wages, business rates, pensions, utilities and the cost of food. However, optimism is high about the market’s ability to deal with these challenges innovatively and investors continue to look for attractive opportunities.
As part of Christie & Co’s Business Outlook 2018, published at the beginning of this year, the team shared their market predictions for the year in the sector. Now reflecting on those forecasts at the half year period, some of the predications are continuing as expected whilst others have taken a turn.
The expectation that UK hotels in 2018 should be able to maintain RevPAR growth, due to exchange rate benefits, visitor numbers and staycations, has been seen. Exchange rate impacts are not as dramatic as last year which may affect visitor numbers, but there is still strong demand from overseas tourists. Additionally, staycations will indeed continue to be a growing benefit to the industry in 2018.
From experience and market insight, Christie & Co anticipated that investor demand would remain strong from UK, European and Far Eastern investors this year. This has indeed been the case, in the first half of 2018, with Indian, Israeli, and Asian investor funds becoming increasingly active in the market, offering competition along with the usual UK and European investors.
In a busy start to the year, Christie & Co has handled some significant deals across the UK, the most recent is the sale of Eynsham Hall, a substantial Cotswolds country house hotel. Other major transactions for Christie & Co in the last few months include the Hallmark Hotel Bournemouth West Cliff which was sold on behalf of Topland Group to Motoring and Leisure Services Ltd (MLS) and the Hilton Coylumbridge in Scotland, sold on behalf of US REIT, Park Hotels & Resorts.
Christie & Co will release its 2019 Business Outlook, presenting an annual overview and year ahead forecast of all of its sectors including Hotels, in January 2019.
Further information on Christie & Co’s UK Hotels team can be found here: https://bit.ly/2NUDXZY