UK hotel transaction volumes 12% above long-term average, says Savills

Investment in the UK hotel market totalled £3.1bn in the first nine months of the year, 12% above the 10-year average.

That’s according to the latest report from estate agency firm Savills, UK Hotel Investment, which found “continued investor interest and resilience” in the market despite the uncertainty surrounding the EU referendum.

Deal count, on a rolling monthly basis, as of June was on par with that seen at the same point in 2015 at 113 and far outperformed the 10 year average of 60.

The research highlighted stock constraints in London and wider economic uncertainty has led to investment decisions being determined by income security rather than geography alone, providing a boost to transaction activity in the UK regions.

In August – a traditionally quiet month – Savills confirmed that 14 regional deals were completed compared to five in July. These included the Imperial Hotel, Torquay for in excess of £10m to the Brownswood Hotel Group and Kenwood Hall in Sheffield for £6.5m.

For the first time since 2011 overseas investors no longer dominate acquisition activity, with UK property companies accounting for 34.6% (£1bn) of total transactions – just over half of this can be attributed to the £550m acquisition of the Atlas portfolio by London & Regional.

Savills expects this trend to continue as the weaker pound in the latter half of the year restricts UK property companies from buying overseas.

Private individuals have also become more active over the course of 2016, with transaction volumes almost double that of year end 2015 levels at £340m.

Marie Hickey, commercial research director at Savills, said: “Although we have experienced some softening in investor confidence in the UK hotels market in the wake of the EU referendum, this has not been to the detriment of the regional market.

“We are not seeing a retrenchment to London that we may have seen previously when faced with uncertainty.

“Rather the focus is increasingly on income security and those markets and assets that offer that, with our analysis suggesting regional towns such as Oxford, Bristol and Winchester offer the most robust operational fundamentals going forward.”