Strong UK staycation market boosts investor interest

UK hotel investment volumes have “climbed dramatically” across the UK since the easing of lockdown, according to Savills

While investment volumes continue to be “dominated” by London, over 77% of deals made since April 2020 were from outside of London, in line with the “strong” trading performance seen across key UK staycation markets. 

As a result, interest levels from private investors for coastal and country hotels have “surged”, according to the property group.

Tom Cunningham, director in the hotel investment team at Savills, said: “With restrictions limiting international travel as a result of Covid-19 we experienced a boom in domestic travel and staycations resulting in many popular tourist hotspots being fully booked over the summer and into late autumn.

“The likelihood of ongoing restrictions into 2021 has meant that holidaymakers are continuing to look to the domestic market for their breaks and some locations are already reporting high levels of demand for next summer.” 

He added: “As a result, we expect robust operational performance in these locations to continue with well-situated regional assets continuing to attract strong investor demand. For regional assets currently on the market we are receiving multiple offers above guide price.”

This performance has also “bolstered” the mid-term confidence behind hotel development opportunities across UK regional destinations, according to the group.

Total hotel investment volumes to the end of September 2020 reached £1.63bn, down 54.4% compared to the same period last year, but interest levels remain “robust”.

International investors accounted for 70.1% of this, primarily by Israeli-backed Vivion Capital acquiring the Sanderson and St Martin’s Lane hotels in January followed by Qatari-based investors acquiring The Ritz in March. 

Meanwhile, London accounted for 87.3% of total UK investment volumes so far in 2020.

Rob Stapleton, director in the hotel investment team at Savills, said: “Demand from cash-rich investors remained robust this year, especially for quality trophy assets in London, with international investors accounting for a significant proportion of transaction volumes. 

“Whilst volumes are down, there remains substantial dry powder in the market albeit the debt markets are considerably constricted at the moment, limiting corporate investor activity in the sector and impacting overall investment volumes.”

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