UK Hotel transaction volumes reach almost £600m in Q1

After a muted end to 2022, transactional activity during the first three months of the year more than doubled to £600m, but deal volumes remained “significantly below” the five-year quarter average of £1.2bn, according to the latest figures from Knight Frank.

It said that deals completed were exclusively single asset transactions, with a dearth of portfolio activity, but with a 50:50 split between regional UK and London completed sales.

UK corporate investors were most active in terms of seller, accounting for over 40% of transactions, whilst a further 23% of the activity was attributed to investment sales completed by UK institutional investors.

It added that buyers who were most active were “experienced hotel owners with a profound understanding and knowledge of the UK hotel sector, be it focused hotel investment groups or corporate hotel owner operators”.

Operationally, the UK hotel market continues to perform strongly, with investors buoyed by RevPAR returning to, or exceeding pre-pandemic levels. Investment in the sector has been fuelled by robust levels of domestic travel, comprising strong leisure, and improving corporate demand, which have yielded often longer and more profitable stays.

Knight Frank added that the London hotel market has seen five sizeable transactions take place during the first three months of the year.

Hotels which transacted included the £55m sale of The Covent Garden Hotel, acquired by Firmdale from CBRE Investment Management; Dalata Hotel Group’s £44m purchase of a newly built, 192-room hotel in Seven Sisters; and the £42m sale of the long-leasehold interest of the Holiday Inn Regents Park Hotel, divested by CBRE Investment Management.

It also concluded that investment appetite in the hotel sector is expected to “remain resilient”, with London and key gateway cities remaining key targets. Various quality assets currently being marketed for sale include The Sheraton Grand Hotel and Spa, Edinburgh with a guide price of more than £100m and the £450m sale of the three London-based Hoxton hotels.

Philippa Goldstein, senior analyst – Hotels and Leisure at Knight Frank, said: “With interest rates remaining high, access to finance and the cost of debt will continue to make certain investors more reticent.

“Yet, large amounts of capital remain to be deployed, and with investors taking a long-term view, the outlook for increasing levels of investment into the sector is positive, with potential for both portfolio and big-ticket single asset deals to take place later in the year.”