The UK’s hotel sector benefited from nearly £6bn of hotel investment in 2019, the result of “continued strong demand” from investors seeking long term, secure income streams.
According to Knight Frank, the growth was driven by record levels of institutional investment and “alternative property types” favoured over other mainstream properties.
Following an “exceptional” level of portfolio activity in 2018, year-on-year hotel transaction volume slowed by £1.2bn for the full year 2019, the equivalent of a 17% decline, but witnessed a decline of only 3% compared with the five-year mean average of £6.2bn and exceeded the 2017 total investment volume by 5%.
Confidence in the hotel sector also remained strong, driven by a “resilient” trading performance and a “greater understanding of the fundamentals of the sector”.
The first quarter of 2019 saw the greatest share of deal volume, with £2.6bn of deals completing during the first three months, driven by a significant volume of portfolio activity.
However, a “lack of clarity” over the UK’s position outside of the EU, combined with a turbulent political climate, led to minimal investment during Q2 and Q3, as investors deferred their investment decisions.
During the final quarter of 2019, hotel investment once again increased with £1.5bn of deals completing, equivalent to 25% of the total transaction volume.
Henry Jackson, head of hotel agency at Knight Frank, said: “London’s position as one of the world’s most liquid and transparent real estate markets is expected to drive continued new pools of opportunistic investors to the UK, with hotel real estate a prime investment target.”