Nine-year hotel investment high at £8.1bn

Total transaction volumes in the UK hotel market reached £8.1bn in 2015, the highest level since the £8.3bn record in 2006.

Estate agent Savills said the figures mark an increase of 31.6% on the £6.1bn recorded in 2014.

Transaction volumes in the London hotel market doubled to £3.6bn in 2015 from £1.8bn the previous year, led by a number of high-profile deals including the £1.37bn sale of a share in the Marylebone portfolio, which included Claridge’s.

Savills also highlighted the £345m sale of the Holiday Inn, Kensington and the £270m sale of the Bulgari hotel, Knightsbridge among the capital’s most significant deals of 2015.

The firm reported that the regional hotel market remained strong last year, accounting for 55.6% of transactional volumes – although down on its 71% share in 2014.

Notable regional transactions included the sale of the Hilton Newcastle Gateshead for approximately £37m and the sale of the Cambridge City hotel for £61.5m.

Meanwhile, portfolio transactions dominated for the second consecutive year – 59.3% of volumes in 2015 and 52.9% in 2014 – with major transaction including Lone Star Funds’ acquisition of 22 Mercure branded hotels and Fraser Hospitality’s purchase of the Malmaison portfolio for around £363m.

Robert Stapleton, hotels director at Savills, said: “With the operating landscape in the UK’s regional markets continuing to improve and such a significant amount of equity looking to deploy into the sector, we expect 2016 to be another strong year for investment into the UK hotel market.

“We are still experiencing growth in demand for regional assets from investors seeking higher return profiles.”

He added that the firm equally expects London to continue to show impressive capital growth, albeit at a slower rate, as well as increased transaction volume as overseas investors seek “capital preservation opportunities”.