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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 and Co.
The report, ‘Business Outlook 2020: Focus on Business’, noted that the sector “responds well” to changing investor requirements by adapting operating structures and evolving and innovating brands with technology.
However, throughout 2019 Christie and Co said it 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.
Additionally, Christie and Co said 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 also predicts that 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.
Despite this, it suggests the general election outcome and renewed investor confidence should “unlock the transactional market”, and added that quality assets in markets with the “right fundamentals” will continue to see growth in 2020.
Carine Bonnejean, managing director hospitality consultancy at Christie and Co, said: “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.”
