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The UK has had the strongest hotel transactional activity of any European country in the year-to-date to Q3 2024, registering 38% of the £13.3bn of hotels transacted, according to Christie and Co’s hotel consultancy team.
The volume of hotel transactions was also 2.5 times the full-year volume of 2023, and as a result, Christie and Co believes 2024 is “visibly on the rise”, surpassing 2019 and 2021 annual transaction activity.
This has been supported by a slight compression in yields, attributable to the stabilisation of the trading environment and progressive reduction in financing costs, which have narrowed the price gap between sellers and buyers.
The distribution of transaction volumes between London and other UK regions shows only slight change from 2023 Q3 year-to-date. Despite marginal gains for regional UK, portfolio-led activity maintains an even geographical distribution.
According to Christie and Co, the resurgence in transaction activity was driven by several portfolios and institutional and private equity investors, including Starwood Capital’s purchase of 10 Radisson Edwardian, Ares’ purchase of the LandSec Accorinvest portfolio, Village Hotels being acquired by Blackstone, and Travelodge’s purchase of 66 freehold hotels from LXi REIT.
As a result, nearly 80% of transactional volume was portfolio linked during Q3 year-to-date, a mirror image of the previous year. Whilst single assets are still transacting, they only represented about £1.1bn worth versus £3.8bn worth of portfolios.
Christie and Co has attributed the slower growth in single asset transactions to a “wait and see” approach of individual investors, having assumed earlier and more significant cuts in central bank base rates.
Jeremy Jones, head of hotels brokerage at Christie and Co, said: “The recalibration of pricing and the softening of yields have been progressive since early 2023 and are starting to unlock deals. The pricing gap between buyers and sellers has narrowed and there is more debt in the market for larger deals.
“With further interest rate cuts on the horizon, we anticipate improved liquidity in the debt markets in the last quarter of the year to support a wave of refinancing together with a progressive but slow sharpening of yields, all converging to increased fluidity in the UK transactional market.”
