TRANSACTIONS
What ’ s the Deal ?
U . K . HOTEL INVESTMENT SURGES IN H1 2024 .
By KATHAKALI NANDI
P
ortfolio transactions in the U . K . have boosted hotel investment in the first half of the year to £ 3 billion compared to £ 990 million in the same period in 2023 , according to Knight Frank . The figure also exceeds last year ’ s total hotel investments worth £ 2 billion , the real estate consultancy further noted .
Some of the major deals that helped drive investment in the first six months this year were Blackstone ’ s £ 850-million acquisition of the 33-hotel Village Leisure portfolio , Starwood Capital Group ’ s £ 800-million purchase of 10 Radisson Edwardian Hotels in London and Landsec ’ s £ 400 million sale of its hotel portfolio to Ares Management , which Knight Frank advised on .
Knight Frank ’ s data revealed that first-half investment was only 10 % below pre-pandemic figures . London attracted the lion ’ s share of investment activity in the first half , with around 70 % of investment focused on the capital , bolstered by overseas investors who accounted for acquisitions totaling £ 1.3 billion . Investors from the U . S . have dominated the landscape , accounting for 77 % of the overall investment activity in the U . K .
Historically in the U . K ., hotel investment is mostly driven by a combination of portfolio and single-asset transactions . In the first six months this year , however , there was a considerable lack of quality , single-asset hotels up for sale , Knight Frank said , resulting in single-asset deals declining by 19 % year-over-year and a 34 % drop in transaction volume .
The challenging investment market left its mark on the number of development and individual fixed-income deals that traded , resulting in portfolio transactions representing nearly 76 % of the total H1 transaction volume , compared to 53 % in H1 2019 , when a similar level of portfolio transactions took place .
“ The direction of travel for the sector is positive and the volume of
portfolio transactions is evidence that the sector remains attractive ,” said Henry Jackson , partner and head of hotel agency at Knight Frank . “ 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 realize 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 , [ we ] expect this momentum to continue . An interest rate cut will serve to further enhance the current optimism for investment in the UK hotel market .”
LOOKING AHEAD The outlook for the second half of the year is promising , Knight Frank said , adding that the momentum for investment in the hotel sector is continuing to build and is benefitting from a range of “ wellcapitalized investors .” Distress sales will be substantially lower than previous cycles .
Research suggests that stakeholders are building pressure on owners to bring assets to the market at deliverable levels , which will conclude in a successful and more timely sale .
Investment activity will be stronger in the second half of 2024 , Knight Frank projects , with more hotel portfolios expected to sell , combined with a higher volume of single-asset opportunities coming to market . Though the gap between buyer and seller price expectations is narrowing , patience will win the day
Regarding new hotel developments , the U . K . led Europe with the highest number of new projects in the pipeline at the end of the first quarter with 321 projects and 45,257 rooms , according to the latest study by Lodging Econometrics . Among European cities , London had the highest first-quarter pipeline by project count with 80 projects and 14,987 rooms .
90 hotelsmag . com July / August 2024