UK hotel investment hits £3bn in H1

Hotel investment in the UK has hit £3bn in the first half of the year, up from £990m over the same period in 2023, whilst reaching “far beyond” last year’s full year total of £2bn, according to Knight Frank.It comes amid several “significant” deals over the period, including Blackstone’s £850m acquisition of the 33-strong regional Village Leisure portfolio.

Elsewhere, Starwood Capital Group acquired 10 Radisson Edwardian Hotels in London for £800m, while Landsec confirmed a £400m disposal of its hotel portfolio to Ares Management.

Knight Frank’s analysis shows that H1 investment was only 10% lower than the pre-pandemic level in the first half of 2019. 

Historically, hotel investment has been driven by a mix of sizable portfolios and single asset deals. However, according to Knight Frank, there was a “notable lack of quality, single asset hotels available for sale” over the period, resulting in a 19% decline year-on-year in the number of single asset transactions and a 34% decline in the transaction volume. 

It added that the “challenging” investment market has also impacted the number of development and individual fixed income deals that have transacted, resulting in portfolio transactions accounting for some 76% of the total H1 transaction volume, compared to just 53% in H1 of 2019. 

Looking ahead, Knight Frank said the outlook for H2 is “encouraging”, with momentum for investment in the UK hotel sector continuing to build and benefitting from a diverse pool of well capitalised investors. Whilst levels of distressed sales are expected to remain “substantially” lower than compared to other cycles, it found there was evidence to suggest that stakeholders are not only increasing the pressure on owners to bring assets to the market, but at deliverable levels that will conclude in a successful and more timely sale. 

Henry Jackson, partner and head of Hotel Agency at Knight Frank, said: “The direction of travel for the sector is positive and the volume of portfolio transactions is evidence that the sector remains attractive. An increase in the quality and the number of hotels seeking to transact is expected, as hotel owners who have extended their investment cycles now seek to realise their exit strategies. 

“Where a particular asset meets all the investment criteria, we have seen certain buyers willing to pay full prices for these assets. With a strong pipeline of hotels currently in legals, the Knight Frank Hotels teams expects this momentum to continue, and an interest rate cut will serve to further enhance the current optimism for investment in the UK hotel market.”