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The hotel market saw signs of recovery during the first half of 2022, followed by a 2.8% increase in the hotel price index for the second half of the year, according to Christie and Co’s hotel business outlook report.
According to the report, uncertainty began to creep in due to macroeconomic conditions that slowed transactional activity within the sector.
The report also indicated that on average, Christie and Co sold two hotel businesses per week, a level slightly behind 2021, yet still maintaining its position as the “market leader” for hotel deals by volume.
This activity was dominated by individual asset sales across the regions, as buyer appetite for quality assets in regional cities, semi urban or coastal locations remained strong.
Looking to the year ahead, the report predicts that the hotel sector is procyclical and that RevPAR will soften in 2023, as the recession impacts discretionary spending and corporate activity.
In addition, the property adviser expects that the market will become “more polarised”, with luxury and economy faring better compared to the mid-market, which will be squeezed.
Meanwhile, pricing will be expected to adjust, reflecting increasing debt costs and eroding profits as the softening in yields observed in the fourth quarter of 2022 will continue.
Carine Bonnejean, managing director of hotels at Christie and Co, said: “As we ended 2022, ‘heaven and hell’ was a good representation of where the UK hotel market was, with many hotel operators holding off on selling and buyers adopting a ‘wait and see’ approach in anticipation of a price correction and an increased volume of distressed assets coming to market this year.
“Yet, we have kicked off the new year with a strong pipeline of new instructions and advisory work, and we anticipate renewed activity over the coming months. The majority of respondents who took part in a sentiment survey that we conducted at the end of 2022 indicated plans to buy and/or sell in 2023, suggesting the market will remain buoyant, despite facing the confluence of headwinds that are expected to exert pressure on owners and operators this year.”
