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Investment into UK hotels in 2018 is set to be driven by institutional activity and the maximisation of returns, according to new research.
Real estate advisor Savills said total UK hotel transaction volumes reached £5.4bn in 2017, exceeding the 2016 total by 32%. It added that institutional investors were particularly active, driven by the hunt for income in the face of Brexit, and accounted for £602.6m of transactions – 39% higher than the levels recorded in 2016 with deal counts also up 40%.
Leased serviced apartment assets, historically dominated by owner occupiers and private equity, are becoming more attractive due to their ability to be run with an operating partner and long term income offering, the research suggested.
It found that branded hostels could also benefit from increased investment activity, with growth in the youth traveller market and the ability to maximise the yield from a single room being particularly attractive to investors.
Martin Rogers, head of UK hotel transactions at Savills, said: “The UK hotel market had a strong 2017 and looking ahead to the rest of this year we expect the positive sentiment to continue. The depth of the sector ensures that a range of investors remain active in the market as both occupational demand and returns remain at a robust level.”
He added: “The fundamental supporting operational demand over the longer term and particularly in the face of Brexit, leads us to believe investor appetite for UK hotels is set to remain firm in 2018.”
