UK Hotel Capital Markets - Investment Review 2022 Emerging strong - £4 billion of hotel transaction in 2021, demonstrates resilience and long-term ...
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Emerging strong – £4 billion of hotel transaction in
2021, demonstrates resilience and long-term well-
being of the UK Hotel sector
UK Hotel
knightfrank.com/research
Capital Markets
Investment Review 2022
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TRANSACTION
OVERVIEW
The UK Hotel Market recorded an impressive £4 billion of transactions in
2021, with growing investor sentiment and optimism over the long-term
prospects for the sector. Backed by improving trading performance and a
faster sector recovery than initially expected, we anticipate a robust and
active year ahead for investment in hotel real estate. Luton Hoo Hotel & Spa. Acquired by the Arora Group. Confidential marketing campaign which resulted in multiple offers.
Note: excludes the acquisition by Blackstone of Bourne Leisure for a reported £3 billion
KNIGHT FRANK 2021 PREDICTIONS UK HOTELS – INVESTMENT
SUMMARY FOR 2021
T
110%
his past year has illustrated the started to return, with year-on-year At the start of the year, opportunistic PRE DICTIONS OUTC OM E
strong resilience in the UK hotel hotel transaction volume more than investors scoured the market keen to
sector, from both an operational and doubling and investment volumes capture assets at a discount to pre-
UPLIFT ON 2020 TOTAL UK HOTEL
property perspective, but has also increasing by over £2 billion in 2021. pandemic values, but with extended INVESTMENT VOLUME
magnified the importance of investing Whilst the weight of capital invested government financial aid and banks
in well-located assets, benefitting from into alternative property during
4.9bn
supportive to their existing clients, very
multiple demand generators, combined
2021 remained relatively static, at little distress emerged amongst assets
with strong management and leadership.
approximately £14 billion, as an
that traded strongly pre-pandemic.
COVID-INDUCED HOTEL
SALES EXPECTED TO INCREASE
Transactional activity improved following
lifting of restrictions, Q4 strongest with
£
FROM Q2-2021 investor sentiment improving. 5-YEARLY AVERAGE ANNUAL VOLUME
Given the uncertain trajectory of asset class Hotels increased its share,
UP 20% COMPARED TO 2012-2016
Covid-19 throughout 2020, the reduced representing 28% of investment in the Instead, reputable hotel owners and
investment activity was to be expected UK Specialist Property Sector, compared operators focused on pro-active cost
(£1.9 billion). Yet investor confidence to only a 13% share the previous year. control measures, protecting cashflow
through strong operational management,
collaborating and communicating Overseas investment focused towards
£ 1.5bn
INVESTED BY OVERSEAS BUYERS
OVERSEAS INVESTORS TARGET
London, Edinburgh and Manchester.
1 | UK total hotel investment volumes 2012-2021 effectively with stakeholders and making QUALITY ASSETS IN LONDON AND
AN UPLIFT OF 31%
OTHER GATEWAY CITIES
■ Single asset ■ Portfolio ■ Investment ■ Development 5-Year average investment volume full use of government support. Asset
9,000
8,000
sales of higher-value, full-service city-
centre hotels have been relatively few,
whilst hotel companies of all sizes sought
74%
OF OVERSEAS INVESTMENT TARGETED
Transaction Volume Million (£)
7,000
TOWARDS LONDON
valuable time to refinance their existing
6,000
debt facilities or extend the maturity of Strong investor sentiment towards quality
58%
5,000 assets and best in class assets with value-
existing loans and formalise additional INVESTOR PREFERENCE FOR
LEANER BUSINESS MODELS add opportunities.
4,000
flexibility to their facility agreements.
3,000
OF OVERSEAS CAPITAL INTO UK HOTELS
2,000 Where quality assets have appeared for FROM NORTH AMERICAN INVESTORS
1,000 sale, the shortage of available stock, (US INVESTMENT £850 MILLION)
0 improving trading conditions in strong
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
staycation-led markets and a healthy pool Hotels sold for alternative use such as residential,
student housing and last mile logistics. Demand
Private Equity Investors
Source: Knight Frank Research of buyers sought only to maintain or, in RANKED AS TOP UK BUYER IN 2021
REPURPOSING OF ASSETS AND LAND for local authority housing and accommodation for
certain circumstances, increase values. SOLD FOR ALTERNATIVE USE asylum seekers has provided short-term cash-flow. (£1.5 BILLION OF INVESTMENT)
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KNIGHT FRANK 2022 PREDICTIONS
UK HOTEL INVESTMENT SIGNIFICANT VOLUMES OF GLOBAL HEIGHTENED DEMAND
ANTICIPATED TO RISE TO CAPITAL, BACK TO PRE-PANDEMIC FOR HOTELS FROM
£5bn
LEVELS. TOP INFLOWS OF CAPITAL PRIVATE EQUITY
FROM THE USA AND ASIA INVESTORS AND
DEBT FUNDS
environmental
INCREASED VOLUMES considerations
OF PORTFOLIO SET TO DRIVE CHANGE
TRANSACTIONS / IN HOTEL INVESTMENT
HIGHER PRICED
ASSETS COMING Values AND LENDING
TO MARKET
to remain
stable I N FUND
ING
E
in 2022 LED H
AS
INCRE TEL ASSET E,
O
F
S
L
OR SA ILY
ET E D R
AS MORE NORMALISED
MARK T NECESSA
MARKET CONDITIONS O
BUT N
RETURN ESS
DISTR
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HOTEL INVESTMENT
of distress mirroring the aftermath of the holiday destinations and increase its of the extended lockdowns, or where
global financial crisis. weight of support to UK Staycation? the cost to achieve carbon neutrality for
TRENDS – 2022
under-invested assets, may also lead to a
Looking ahead investors will need to For those owners and operators who
rise in investment for alternative use.
remain increasingly alert to the various through the course of the pandemic
headwinds affecting the hotel sector, have learnt to drive the business Changes brought about by the pandemic,
Current market dynamics will ensure a positive year for the UK hotel market, specifically the upward pressure on wages forward by simplifying and streamlining such as the need to unlock liquidity,
with transaction volumes anticipated to rise to £5 billion in 2022. brought about by the ongoing shortage operations to reduce costs, invest in evolving requirements of occupiers and
of labour and the forthcoming rise in the technology and their people, and had the drive to operate sustainable assets,
National Living Wage; the increase in the the belief and conviction in the has brought repurposing of mainstream
cost of sales and rising energy costs, all management strategies employed, these assets to the fore. The availability of
have the potential to adversely impact businesses are likely to emerge more non-core assets suitable for conversion
profits and the ability to drive high level strongly and embrace the challenges or repurposing into desirable hotel assets
of returns. ahead on a much securer footing. is a trend likely to strengthen later in
the year and into 2023 as the recovery
With the pressure to ramp up occupancy Repurposing of assets
in the hotel market progresses. With
during the recovery in 2022, it is difficult drives investment
the ongoing drive by hotel operators to
HENRY JACKSON, to predict just how successful operators
PARTNER, HEAD OF HOTEL AGENCY The repositioning of well-located, expand their market presence, demand
will be in passing on rising operational
underutilised business hotels can lend for development will be strong. As
costs and the planned 7.5% increase in
themselves for repurposing - an example a result, development funding will
W ith the setback of the Omicron
variant having now peaked and
secured loans, taken out during the
height of the pandemic, will need to be
Increased asset rotation VAT. How much will the tightening of
household budgets impact on leisure
being the recent sale of the Croydon Park be stepped up as the sector recovers
The average hold period of an asset for Hotel with plans for a new build-to-rent post pandemic, supported further by
managing to ride out the pandemic with repaid or refinanced on revised terms. spend? Will the return of overseas visitors
institutional capital and private equity development to comprise 600 units. Non- the availability of green finance, to
continued vaccine efficacy, the strong Owners, often guided by their lenders, recover quick enough to counterbalance
has extended over recent years, but with performing hotel assets pre-pandemic, encourage and support efforts to build
flurry of transactional activity that will need to take a strategic look at the the rebound in outbound travel? And,
assets likely to have been held back from which were unable to sustain the impact and operate sustainably.
occurred during the final quarter of 2021 level of indebtedness in the medium to will the grey pound seek more localised
sale due to the pandemic, for certain
is expected to continue in the months long term. Funding-led sales may be an
investors, executing the planned exit
ahead. Facilitated by an extended inevitable outcome, as owners are forced
strategy as the market recovers, will
period of uninterrupted trading in 2022, to prioritise their investment plans and
become a priority.
improving debt markets and attractive to preserve long-term relationships with
sector diversification, these are all their financial backers. Asset rotation is likely, particularly when
factors that will help lure investment, there is increasing demand for global
with best in class assets offering strong uu branded, regional UK hotel stock, with
liquidity and competition in the market. competitive bidding processes driving
With assets likely to have
prices upwards. As the pandemic struck,
Increased portfolio activity is expected, been held back from sale
due to the pandemic, for several transactions were not advanced,
with several opportunities currently
certain investors, executing due to offers falling short of a seller’s
progressing, as investors reignite stalled
the planned exit strategy price expectations. As we emerge from
exit plans or implement new strategies,
as the market recovers, will the pandemic, several of these assets
in order to take advantage of an upturn
become a priority. may once again resume marketing
in the investment cycle.
campaigns for a potential sale. The
uu
Market forces come in to play – weight of new capital looking to invest in
increased funding-led sales operational real estate, should help bridge
The ongoing unwinding of cost the gap in price expectations between
The level of transactional activity in
pressures coming out of the pandemic buyers and sellers.
2021 was held back by a lack of suitable
is continuing to drive up inflation in
hotel stock, which is likely to continue Trading outlook obscured
the short-to-medium term, which is
at the start of 2022. Yet market forces are by headwinds
expected to lead to moderate increases
expected to come into play, leading to
in interest rates during 2022, back to Unequivocally, it has been a testing time
improved availability of assets for sale.
pre-pandemic levels. As pressures on for hotel owners and operators as the
As government subsidies come to an cashflow tighten and the ability to pathway out of the pandemic has taken
end and whilst cash flows are not yet service debt becomes increasing more many unpredictable turns. Had the level
fully recovered, lenders will seek to difficult, this is likely to drive asset of government support not materialised,
exert greater control and housekeeping disposal programmes, opening the door the dialogue concerning distress could
over their loan books. Government for opportunistic cash-rich investors. have been very different, with the level Hilton Bracknell Hotel, 215 Rooms, acquired by KSL Capital Partners and VUR Village Properties, sold off a guide price of £20 million.
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may ultimately attract new investors, financially able to travel internationally What are your key investment
CASTLEFORGE further boosting liquidity beyond 2022. continues to rise sharply, not least from
the growing middle class in China.
criteria and how has this evolved
following the crisis?
What actions have you
undertaken to mitigate With people now more confident to Given that we started investing in hotels
Matt Lederer, Hotel Acquisitions Director financial challenges? work remotely, the work trip that post the onset of Covid-19, our investment
includes a longer stay and travelling criteria has remain unchanged. We seek to
We did not own any hotels before May
with others (friends and /or family), will invest in historically strong regional UK
2020, so avoided many of the financial
become more popular. The converse cities that benefit from robust/growing
challenges brought on by the initial
is also true, with leisure trips being leisure demand and established corporate
Covid-19 lockdown period. Alongside
extended for work purposes. The demand. Underinvested assets and assets
our current operating partner, we
challenge will be creating a product and where the operating structure can be
continually explore ways to improve
uu corporate demand will take longer to What key drivers will boost environment that works equally well for changed are of particular interest, due to
operating efficiency to mitigate future
recover than those that are skewed hotel liquidity in 2022 and work and leisure. the significant value-add opportunity via
Our focus is on ensuring financial challenges. Technology plays a
towards leisure guests. Indeed, beyond? repositioning, rebranding and strategic
our hotels are well placed to significant part in this, as does proactive From a property perspective, ESG
within each market the asset by asset management.
recover quickly. In fact, in our Interestingly, liquidity has not necessarily asset management. has continued its rise to the top of
asset recovery will vary depending
hotels, ADRs and weekend been the issue over the last 12 months, the agenda, and we are no exception. We are confident that our current hotel
on the key fundamentals – location, What long-term opportunities
occupancy have recovered to as there are large numbers of investors Guests are making booking decisions investment strategy will allow us to secure
product quality, distribution system do you consider have arisen
pre-pandemic levels. looking to deploy capital into the sector. based on how green travel to a strong returns for our investors, at or above
and service quality. Our focus is on from this pandemic?
The issue has been a lack of investment particular destination may be and for our return targets. We are currently in the
ensuring our hotels are well placed to
uu opportunities and this has pushed up Prior to Covid-19, the year-on-year many institutional investors ESG has process of finalising our European hotel
recover quickly. In fact, in our hotels,
pricing. Improved visibility and trading growth in global leisure travel was become the most important criteria in investment strategy and this will include core
ADRs and weekend occupancy have
predictability will likely boost liquidity substantial. People’s desire to travel evaluating a potential opportunity. pillars of our UK strategy, while also adjusting
recovered to pre-pandemic levels.
in the short term. The relatively quick has not diminished and the level of For all these reasons, future proofing to the specific market dynamics within the
Why invest in the UK hotel What are your biggest concerns recovery of some markets, demonstrated frustrated demand is now more than our assets from an ESG perspective is Eurozone. This is an area we expect to begin
market today? for 2022? the robust nature of the sector and this ever. In addition, the number of people a key focus throughout the hold period. investment within the very near term.
As a company we have been active in Staff shortages, the increase of VAT for
the UK property market for more than hospitality in April, cost inflation and
a decade and we have applied our deep potential renewal of Covid-19 related
research into global trends and local restrictions all remain a concern for
market insight as we moved into the 2022. Working with our hotel operating
UK hotel market. We also have strong partner, Axiom Hospitality, we are
experience in other operational real already taking steps to anticipate and
estate sectors where value is heavily address many of these concerns. We are
tied to operational success. in a market where operational attention
to detail and quick decision making are
In what timeframe do you
paramount. For example, realising the
consider that both London and
full trading potential of our hotels was
Regional UK will return to pre-
only possible through our responsive
pandemic trading levels?
action to secure agency housekeeping
We expect London to continue to lag staff, despite the cost implications,
the UK’s broader recovery, but that allowing us to operate at 100% capacity
said, when it does recover, London during busy periods, while competitor
could see a quicker recovery than many hotels had to cap occupancy.
currently predict. No pandemic can take
On a positive note, the staff shortages
away London’s status as a prominent
should see owners and operators
destination of interest for leisure and
invest more heavily in staff retention
corporate travellers alike.
and development, benefitting both
In the Regional UK market, recovery employees and the wider hospitality
will not be uniform, but based on industry longer term. Supply chain
the performance of our hotels in H2 challenges have led many hotels to
2021, we are cautiously optimistic source produce more locally, benefitting
about the potential for 2022 trading. the local economy, while also adding to
Markets predominantly reliant on the guest experience. The Crowne Plaza Edinburgh - Royal Terrace, acquired by Castleforge in September 2021. The hotel is under franchise with IHG, and managed by Axiom Hospitality
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HOTEL INVESTMENT
improved sentiment towards lending to breaking year for hotel investment positioned in the branded Upscale and
the sector. in 2015. This demonstrates that the Upper-Upscale segments.
REVIEW – 2021
pandemic has acted as a catalyst for hotel
With the UK in full lockdown at the
investment at the lower end of the market Strong domestic-leisure demand
start of 2021, it is no surprise9,000
that only
with a diverse range of investors, both drives hotel transactions
13% of the total annual transaction
8,000
Transaction Volume Million (£)
domestic and from overseas, with capital
volume took place during Q1-2021.
7,000 The combination of lockdowns, stay-
to invest for the right asset.
Once the government announced
6,000 a at-home orders and tight restrictions
Favourable investment opportunities fuelled by the pandemic
clearer roadmap out of lockdown,
5,000 hotel Portfolio activity accounted for just 23% on travel have heightened consumers’
investment gradually rebounded,
4,000 with of the total UK hotel transaction volume, interest and desire to travel in the UK
approximately £1.3 billion of3,000
hotels sold with two-thirds of the investment taking market and their propensity to spend
W
uu during the first six months, equivalent
2,000 place in the final quarter of the year and more on quality experiences. As the sector
hilst it is undisputed that the Similarly, difficult decisions have been
to 32% of the total transaction volume.
1,000 positioned largely in the upper midscale continued its early recovery, hotel trading
UK hospitality industry has The combination of made by businesses that own and operate
With the recovery in trading performance
0 sector. Portfolio transactions totalled was driven by strong domestic leisure
been one of the hardest hit sectors lockdowns, stay-at- collections of hotels either independently 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
faster and stronger during the summer approximately £900 million, less than demand, with many hotels in coastal and
throughout the pandemic, the trade- home orders and tight or under franchise. As a result, various
and autumn months, this led to half the level of portfolio investment country locations witnessing exceptional
off is the potential for more promising restrictions on travel have hotels changed ownership in 2021
considerably higher levels of investor achieved pre-pandemic in 2019. With levels of revenue generation, reaching
investment opportunities, that would heightened consumers’ following decisive action taken to reduce
sentiment, resulting in 52% of the annual few Upscale and Upper-Upscale hotels heights beyond that achieved during
have remained dormant had this health interest and desire to travel debt, support cashflow, or raise capital
transaction volume completing during transacting as part of a portfolio sale, summer 2019.
crisis not prevailed. in the UK market and their for investment in their wider portfolio.
the final quarter of the year, equating to the average transaction price per room
propensity to spend more Furthermore, with the pandemic fuelling Whilst a strong rebound in outbound
Throughout the successive phases of the over £2 billion of hotels sold.■ Single asset ■ Portfoliodeclined
■ Investment ■ Development
by 44% Market Share per Qtr
in London to £346,000
on quality experiences. changing investment strategies, various leisure travel is anticipated, the desire
pandemic, each with their own level of per room and by 16% in Regional UK to
quality assets previously marketed for Our research, however, reveals that
3,000 for a UK90%
staycation is expected to remain
uncertainty, the liquidity position and uu £123,000 per room, compared to 2019.
sale pre-pandemic have now successfully the makeup of transaction activity was robust, fuelled by shorter but more
access to capital has been a determining 80%
transacted during 2021. vastly altered compared to historical
2,500 Across the UK, for all hotels sold as frequent domestic leisure breaks and
Investment Volume (£ million)
factor for many owners and operators. 70%
resultant effect of this extended crisis has trends. In total, some 150 single asset going concerns in 2021 (single asset if disposable incomes are squeezed,
For many of the smaller, independently Strong uplift in hotel investment
forced many hotel owner-operators to hotel transactions took place2,000
in the UK and portfolio hotel sales, but excluding holidays60%
abroad may be put on hold.
% Share per Qtr
owner-operator hotels, of which there as recovery in trading
close. The investment required to rebuild with a guide price of around £2 million, investment sales and developments), Transactional activity during 2021
are over 10,000 hotels trading in the performance strengthens 50%
and maintain the business, combined equating to approximately £1.9 billion.
1,500 the average transaction price per room illustrates the intense demand for quality
UK, equivalent to 40% of the total hotel 40%
with severe operational challenges such The underlying drivers of increased hotel This represented a 60% increase in the equalled £163,000, a decline of 26% hotels in strategic, strong leisure-
supply, the loss of income endured
as staffing and rising costs, has forced demand, the continued improvement number of deals and 46% increase
1,000 in when compared to 2019 transaction based locations,
30% with investors seeking
throughout the crisis has been significant.
many experienced owner operators to in profitability and visibility for future transaction volume, compared to 2019 prices. This is due largely to the opportunities
20% to reposition a business
Pre-pandemic, many under-invested make a lifestyle choice, choosing to retire trading, have contributed to growing and is the highest level of single
500asset scarcity of certain assets transacting, and take advantage of its trading position
10%
hotels continued to trade, but the and/or exit from the sector. optimism amongst investors and banks activity to take place since the record- in particular trophy assets and hotels in the longer-term.
0 0%
2 | UK hotel investment volume per quarter 2018-2021
■ Single asset ■ Portfolio ■ Investment ■ Development Market Share per Qtr
3,000 90%
80%
Investment Volume (£ million)
2,500
70%
2,000 60%
% Share per Qtr
50%
1,500
40%
1,000 30%
20%
500
10%
0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2020 2021
Source: Knight Frank Research
Best Western Hotel Bristol, Newquay, purchased by Salboy Ltd, a UK developer. Acquired for its current trading business, combined with its future development potential. Sold off a guide price
of £5 million, receiving strong interest and second round bids.
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Whilst most traditional high street banks Institutional investors were most active in UK transaction volume increased to transaction volume was attributed
have taken a cautious approach to new the London market, notable transactions 51% (excluding developments), more in to the sale of independent hotels.
lending, emerging challenger banks and where Knight Frank advised the line with historical trends. The market This variation resulted in the average
have shown a much greater appetite, vendors, included the sale of Yotel London share typically ranges between 55% to transaction value per room for all
growing their loan books considerably Clerkenwell to LGIM Real assets at a guide 58%, depending upon the volume of hotels sold as a going concern falling
during the pandemic. Several existing price of £70 million and The East London portfolio transactions. by 24% compared to 2019, to
owner operators have capitalised on this Hotel, sold to Avelios Property Group & approximately £118,000 per room.
opportunity, allowing them to pursue Crestline Investors, the latter, a Texan-
uu Portfolio transactions accounted for
their vision for organic growth. based US fund. Meanwhile, the sale of
With the pandemic a further 32% of regional UK hotel
Dorsett City London Hotel for £115 million,
A select number of specialist inns and stimulating significant transactions, with 64% of the total
acquired by Cerberus Capital Management
pub operators have emerged, seeking investment activity, the portfolio transactional activity taking
& Highgate Hotels for £431,000 per room,
to capitalise on the growing lifestyle volume of transactions in place in regional UK.
represented the largest deal acquired by a
trend, by offering quality, local, leisure regional UK totalled over
private equity investor. Whilst hotel investment into fixed lease
experiences, food-driven pubs with £1.8 billion
assets by institutional investors has
a comfortable overnight stay. UK Despite, over 5,000 new hotel rooms uu grown in recent years, these institutions
domestic owner-operators such as under construction and due to open in
are typically well-capitalised, allowing
The Inn Collection Group, Chestnut London in 2022, the pandemic-induced
In contrast to transactional activity them to face contingent situations
Group, RedCat Pub Company, Cameron development pause, has resulted in a
pre-pandemic, in 2021 regional UK has and ride through such periods of
Ventures and Butcombe Brewery, have slowdown in the city’s future pipeline of
witnessed a substantial decline in both challenge. In 2021, the budget hotel
all expanded in size, by sourcing unique new supply. Nevertheless, the London
development and investment activity. sector, which historically has made
venues in popular locations, steeped in market attracted 88% of the hotel
The number of single asset hotels up the bulk of fixed lease investment
character and history and which benefit development finance in 2021, with five
transacting in Regional UK represented activity, accounted for just 10% of
from sympathetic restoration development deals completed during the
over 80% of the total deals but accounted the regional UK transaction volume,
and remodelling. year. This equated to £450 million
The Winchester Hotel, acquired by UK domestic buyer, Jastar Capital. Competitive bidding process, resulting in a sale at for only 53% of the total Regional UK recording approximately £180 million in
10% above the guide price. of funding raised to service 1,200 new
Because of the strong domestic leisure transaction volume. Approximately one transaction volume, a decline of almost
hotel rooms, with investors focused
demand there has been an exceptional quarter of single asset transactions were 76% compared to investment in 2019.
This represented an astounding 385% transactions, accounting for a 54% share almost exclusively on developing
level of distinctive assets being sold, in attributed to independent hotels at a price
increase compared to transaction volumes of total UK transactions (declining to 49% budget hotels or serviced apartments. In 2022, the liquidity of the UK hotel
terms of their unique location, heritage, point of less than £10 million.
in 2019. when excluding hotel development), the Competition for prime central London market is expected to be much
building fabric, history and positioning
sales activity increased by 50% compared stock suitable for conversion to serviced By comparison, in 2019 single asset hotels stronger, with regional UK seeing a
relative to their local environment. Our The sale of Barnsley House Hotel, a
to 2020. Still, it represented a 20% decline apartments, is compelling. represented just over 30% of deals and higher proportion of portfolio activity,
research indicates some £625 million Cotswold country house hotel, where
when compared to 2019 – which at the 25% of the total Regional UK transaction together with a rebound in the fixed
of hotels, independently operated, Knight Frank acted on behalf of the In conclusion, there remains a high
time was considered a year of subdued volume. In 2019, 15% of the single asset lease investment market.
transacted in regional UK during 2021. Calcot Collection, demonstrates the number of well-funded investors keen to
activity due to a scarcity of assets for sale.
demand for quality hotel assets located acquire prime hotel assets and London
in strong leisure-based destinations. The London witnessed some 38 hotels deals is set to be a major beneficiary of this
4 | UK Hotel transactional volumes (million)
3 | UK hotel investment 2021 24-bedroom property was sold to a Hong completing (excluding developments), capital as the global city recovers. With London v Regional UK 2012-2021
by grade volume v rooms Kong-based HNWI, with the achieved greater than the number of deals which the best assets enjoying high levels of
price per key at a record price for regional completed in both 2019 and 2020. But liquidity, Knight Frank is aware of several ■ Regional UK ■ London 5-Year average Regional UK 5-Year average London
Rooms Volume
UK hotels. with the absence of any trophy assets of high-end London hotels currently being 9,000
3-star 4-star Budget
5-star Apartment 2-star transactions, the average transaction prepared for sale in 2022. Strong levels
London investment levels hold 8,000
1% price per room decreased by 27% of demand are expected, and it will be
up with a sharp rise in activity 7,000
compared to 2019, to £302,000 per room interesting to see how these sales progress.
11% 10% in Q4 6,000
(excluding developments).
6%
5%
1% Regional UK – liquidity
Million (£)
3% Despite the recovery only properly 5,000
In total, some 29 London hotels transacted boosted by single asset hotel
19% commencing in the autumn, once 4,000
14% as going concerns, representing 33% of the transactions
12%
international travel restrictions were
total UK transaction volume. Transacting 3,000
eased and working from home guidelines With the pandemic stimulating significant
58% at around £392,000 per room, London’s 2,000
ending, investment levels in the Capital investment activity, the volume of
largest hotel deal at £355 million, involved 1,000
have been resilient. Investor confidence transactions in regional UK totalled
60%
the sale of the 906-room Holiday Inn
grew stronger as the year progressed, with almost £1.8 billion, this follows a dearth 0
Kensington Forum, acquired by The 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
the final quarter of the year witnessing of investment the previous year, due to
Fragrance Group, a private Singapore
Source: Knight Frank Research 50% of London’s total annual transaction the lack of stock available in the market. Source: Knight Frank Research
property company.
volume. With over £2.1 billion of hotel Regional UK’s market share of the total
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ZETLAND CAPITAL uu
PARTNERS
We are more confident in
London and gateway cities,
such as Manchester and
Edinburgh, given their
Lily Wecker, Vice President long-term appeal to a wider
base of international and
domestic guests.
uu
Why invest in the UK hotel How would you consider refurbished hotels and those that have all, we at Zetland emphasize the “S”
market today? the recovery of London and secondary locations. Well-located (social) aspect and prioritize taking care
Regional UK to pre-pandemic regional hotels could benefit from a of our team members both in terms of
We are optimistic about the macro
trading levels? balanced mix of leisure transient demand their physical and mental well-being
prospects of UK gateway cities. UK
and corporate & MICE demand, whereas as well as their job stability and income
cities have strong fundamentals with We are more confident in London and
those with a secondary location may security. 70% of employees now demand
population growth (7.6% p.a.*) and job gateway cities, such as Manchester and
struggle to diversify from groups and purposeful work*** and younger
creation (10 largest cities accounted Edinburgh, given their long-term appeal
attract transient traffic in the long-term. consumers increasingly pay a premium
for 46% of job creation in 2013-19**). to a wider base of international and
for sustainable products. It’s a win-win
While the pandemic continues to domestic guests. Although Regional UK What key trends do you
to invest in ESG.
hinder international and corporate performed superbly in the summer of envisage will evolve in 2022?
travels, we expect this demand to fully 2021 boosted by domestic tourism, we The inflationary environment has
The rise of ESG coupled with accelerated
recovery by end of 2024. We see the are cautious whether they could sustain encouraged us to think creatively
cost inflation will likely continue. ESG is
current environment an opportunistic this demand or not. As the recovery about increasing efficiency across
now front and centre to our hotel staff,
window for acquiring sound assets and continues, we expect a bifurcation our portfolio. For instance, installing
guests as well as shareholders. Above
repositioning them in the next 1-2 years. between well-located and recently energy-efficient M&E, up-skilling the
workforce and adopting re-usable or
bio-degradable materials are just a few
initiatives we have rolled out.
What key drivers will boost
hotel liquidity in 2022 and
beyond?
We saw a lot of capital deployment from
equity investors in 2021. The return of Hospitality hasn’t been known as an needs and provide creative capital
credit will be key to further liquidity industry generous to its staff, and here solutions. During the pandemic, we
in 2022. While alternative lenders we have an opportunity to improve closed multiple investments where we
remained throughout the year of 2021, working conditions, invest in diversity provided rescue financing and growth
we expect senior lenders to return to recruitment initiatives, and develop the equity funding to family-owned groups.
prime hospitality assets in the second next generation of talents.
half of 2022 in a meaningful way.
What are your key investment
What long-term opportunities criteria and how has this
do you consider have arisen evolved following the crisis?
from this pandemic?
Zetland invests in complex, special
This pandemic could serve as an situations where capital is urgently
opportunity to re-think guest experiences needed or scarce. Our core thesis is Sources:
* www.gov.uk - trend deck 21:Urbanisation
and employee well-being. Guests and to invest in quality assets and strong
** www.centreforcities: why cities will be our main job
employees are now more acutely aware management teams in prime leisure creators post covid
Zetland Capital Partners acquired The Macdonald Manchester Hotel (338-bedrooms) and The Macdonald Holyrood Hotel, Edinburgh (157 bedrooms) from Macdonald Hotels in
of safety measures, air ventilation, destinations or city-centre locations. *** www.mckinsey.com - help your employees find
purpose or watch them leave
November 2021. fair treatments, and mental health. We strive to understand our partners’
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OVERSEAS INVESTMENT MOST ACTIVE INVESTORS
London a key target for safe-haven investment Private Equity investors ranked as top UK buyer in 2021
I n 2021, overseas buyers invested
almost £1.5 billion into the UK hotel
America, with a total investment volume
of more than £850 million, of which
notably corporate, group and international
overnight stays. Hotel trading performance
C apital flows from private equity
investors totalled almost £1.5
Goldman Sachs & Cedar Capital
Partners acquired The Belfry Hotel
uu
market, an uplift of 31% compared to 75% of the investment volume targeted underpins the transaction market, and as billion in 2021, representing a 39% share & Resort for £140 million from US The strong level of
the previous year, but off a relatively London. A further 27% of overseas London’s trading performance strengthens, of the UK’s total investment volume. Private Equity firm KSL Capital. investment in the UK hotel
low base, this represented a 28% decline investment came from Asia, equating we envisage an increase in hotel assets Regional UK was a strong beneficiary of sector by private equity
Brookfield-backed, serviced
compared to 2019. Some 74% of overseas to over £400 million. Over 90% of this marketed for sale. this capital, with approximately £950 investors verifies the weight
apartment operator, edyn group
investment was targeted towards capital originated from the Singaporean million invested, representing 54% of the of capital seeking investment
The investment made by the Fragrance signed a £195 million debt facility
London, this is a complete reversal of the investor, the Fragrance Group, following total regional UK investment and 62% opportunities. They
Group, endorses the group’s commitment with Blackstone’s Global Real
investment focus in 2019, where regional the purchase of the Holiday Inn Forum share of total private equity investment. partner with experienced
to the UK, having previously acquired Estate Debt fund (BRED) and KSL
UK attracted 73% of overseas investment. Kensington Hotel and Aloft Liverpool operators, aiming to create
five operational hotels and a further six The two largest portfolio deals to Capital Partners, with the funds
With over £1.1 billion of investment Hotel, which together accounted for 25% quality portfolios with
development sites, in strategic resort and transact in 2021 – Henderson Park’s used to support its expansion into
injected into the London market, of the total overseas investment. Even growth potential.
city centre locations, since 2017. Such acquisition of 12 Hilton hotels (Project Europe and to develop its newly
overseas capital represented 51% of without this transaction, still some 66%
investment is testament to the optimism Conrad) and MCAP Global Finance’s launched brand, Cove. The facility uu
the total London hotel investment. In of the overseas capital flow was targeted
that committed overseas investors have on acquisition of 17 Holiday Inn and Crowne contributed to the £62.5 million
contrast, only 21% of the investment towards London.
the future of the UK hotel property market. Plaza branded hotels (Project Horizon) – funding arrangement to secure
volume in regional UK originated from Prior to the sudden arrival of the Omicron For HNWIs, with access to patient capital, were both acquired using private equity, the acquisition of Cove Landmark complement or diversify their existing
overseas. Despite the unprecedented variant, London continued to deliver its the UK hotel sector offers the opportunity accounting for approximately 44% of the Pinnacle Canary Wharf, where hotel portfolio, possessing the market
challenges and uncertainty endured highest level of profitability since the to look beyond traditional asset classes, investment secured by this investor type. 162-units will operate as serviced knowledge and expertise to acquire
by the sector, it is apparent that global start of the pandemic, boosted by an providing access to prime real estate and apartments, within the new the asset based on the current trading
investors seek post-pandemic safe The strong level of investment in the UK
uplift in the UK domestic market and land, with the potential to reposition, 75-storey luxury residential tower. performance. Deals where Knight Frank
havens and London’s hotel real estate is hotel sector by private equity investors
overseas visitors. Despite the temporary extend or develop the assets. Investments acted on behalf of the owner included:
a certain target and beneficiary. verifies the weight of capital seeking Cerbereus Capital Management
set-back of Omicron, London’s recovery of this scale have potential to offer these the Arora Group’s acquisition of the
investment opportunities. They partner and Highgate Hotels purchasing
Almost 58% of overseas capital injected is expected to gather pace, boosted by investors stable, resilient cashflows and 5-star, Luton Hoo Hotel, Golf & Spa;
with experienced operators, aiming to the Dorsett City London Hotel for
into UK hotels originated from North the return of key sources of demand, high returns over the long-term. Kaleidoscope’s purchase of Bishopstrow
create quality portfolios with growth £115 million.
House Hotel in Wiltshire; Jastar Capital
potential. Other significant Private
UK domestic buyers seek completed on The Winchester Hotel & Spa
Equity investors active in the sector
5 | Buyer origin out opportunities to drive and the acquisition of the Bentley Hotel
2021 vs 2019 during 2021 included:
organic growth & Spa in Lincoln and Stanton House in
2019 2021
Zetland Capital Partners, A growing number of domestic Wiltshire to the same private owner.
UK Middle East
who acquired the Macdonald operators have succeeded in raising Assets which have been marketed for
European East Asis
Manchester Hotel and Macdonald debt finance and/or are well funded sale, following action taken as a result
North America Other
Holyrood Hotel in Edinburgh for and are capitalising on opportunities of the pandemic, have continued to fuel
1% a sum in excess of £100 million, the pandemic has presented. UK
this trend for domestic buyers to acquire
as well as acquiring the De Vere corporate hoteliers and corporate
attractive assets on a selective basis,
22% 4% 1% 63% Staverton Hotel in Daventry. The buyers represented 17% of the total UK
with some £400 million of hotels
group also acquired The Morrison a transaction volume, but almost 30%
10% transacting in 2021 to a UK Corporate
DoubleTree by Hilton in Dublin for share of the total rooms transacted.
11% Hotelier. Other examples of sales include
approximately €65m.
10% 9% Knight Frank has been instructed on the acquisition of the Hilton Warwick/
65%
Conker Dawn, a new investment several deals where the successful Stratford-Upon-Avon by Serani Hotels;
3%
vehicle, acquired the Hampton by purchaser is a reputable UK domiciled the purchase of Five Lakes Resort in
1%
Hilton Waterloo and the Doubletree buyer, already with a strong presence Colchester to Potters Leisure; Lakeside
by Hilton York from privately- in the UK Hotel sector. These well- Newby Bridge in the Lake District to
Source: Knight Frank Research owned, UK-based Shiva Hotels, for capitalised buyers have acted quickly Classic Lodges; and Bredbury Hall &
Barnsley House Hotel, acquired by Halo HP Hong Kong Ltd. The 24-bedroom hotel, sold for a record price per key for
Regional UK. approximately £95 million. and purchased assets which directly Country Club to Vine Hotels.
18 19
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AVELIOS
expect an increase in forced sales acquire a quality asset in a rapidly team and a leading firm as our
as lenders are likely to become less developing London submarket, well white label hotel manager to help us
ALTERNATIVE ASSETS
forgiving for struggling hotels and any positioned to benefit from a post-Covid reposition and stabilise the asset.
covenant breaches. market recovery.
There is no doubt that Covid-19 has What actions have you uu
stimulated an interesting landscape for undertaken to mitigate Overseas investors are
Guido Lang, Chief Investment Officer
investment. We focus on future-proof
financial challenges? attracted to the UK as it is
assets in liquid markets across Europe
among the most liquid and
Our underwriting assumes a
transparent commercial real
that provide attractive, uncorrelated, conservative and gradual market
estate markets globally.
risk-adjusted returns. The East London recovery and we have appointed a
Hotel presented an opportunity to market leading professional advisor uu
Why invest in the UK hotel one of the most visited and culturally
market today? vibrant cities in the world thanks to
its deep history, arts and culture and
We are positive on the UK hotel market
position as global economic centre.
post Covid-19 and eager to deploy
capital into the market at an attractive What key trends do you
point in the recovery cycle. We target envisage will evolve and what
high quality assets, in good and rapidly are your main concerns in 2022?
improving locations, benefitting from
Whilst the domestic leisure and corporate
strong fundamentals, at an attractive
travel markets are likely to recover
entry basis with value-add potential from
soonest, we expect the international
repositioning or stabilisation.
market to recover rapidly as travel
Our aim is to reposition and stabilise the restrictions ease and people crave a
hotel in the short to medium term before return to physical connections.
considering a sale.
What is your view concerning uu
the long-term prospects of the We are positive on the UK hotel
UK hotel market? market post Covid-19 and
eager to deploy capital into the
In the long-term the UK, and particularly market at an attractive point
London, will continue to benefit from in the recovery cycle.
a combination of strong domestic and
uu
international leisure and corporate hotel
demand. We are particularly positive
Cost inflation, including rising energy
on efficient and well-located urban city
prices and the cost of supplies remain
centre hotels, that provide flexible and
key concerns in the current trading
good value accommodation to a variety
environment. Similarly, impacting
of guest types, and which have great
across the sector, staff shortages will
transport links.
remain a challenge, and the return of
We consider that both London and VAT back to 20%.
Regional UK will return to pre-pandemic
What key drivers will
trading levels between two to three years.
boost hotel liquidity in
What are the key attractions for 2022 and beyond?
overseas investors to invest in
There is pent up investment demand
the UK hotel market?
from hotel investors, following years of
Overseas investors are attracted to the market disruption and we expect to see
UK as it is among the most liquid and more disposals as owners look to unload
transparent commercial real estate assets, they were unable or unwilling
markets globally. London will remain to sell during the pandemic. We also
The East London Hotel, acquired in a joint venture agreement between Avelios Alternative Assets and Crestline Investors in October 2021.20 21
U K H O T E L C A P I TA L M A R K E T S 2 0 2 2 U K H O T E L C A P I TA L M A R K E T S 2 0 2 2
INSTITUTIONAL INVESTMENT uu
Conversely, we saw very strong investor an investment-grade product, will be
Whitbread-let investments demand return for Whitbread / Premier subject to the quality and location of the
are experiencing the Inn-backed assets, with institutional stock, as well as institutional investors
The Continuing Appeal of the Hotel Sector highest level of demand investors leading the charge. Pricing becoming more accepting of variable
and yields are predicted achieved on assets in December was at occupational turnover-based leases.
to sharpen further for the levels higher than pre-pandemic.
As we enter 2022, fixed lease hotel
Diversification in investment- combined with a substantial uplift in investors will be expected as the recovery most sought-after assets. We
It is clear, that many now interested in the transaction volumes are expected to
grade stock drives growth in pricing in the broader investment market takes place. are experiencing renewed
sector are not purely focussed on covenant increase, with the sector offering
the average transaction price (comprising fixed lease, ground lease and demand for Travelodge-let
The sale of the 212-room Yotel London strength, but they are also considering the portfolio diversification and value
per room income strip transactions), investment investments and this will
Clerkenwell, which sold off a guide price of stability of the rental income stream and compared to other asset classes, on a
sales transacted at an average transaction continue to build as the year
In pursuit of available investment-grade £70 million to LGIM Real Assets, was one of predictability of future cash flows far more risk-adjusted basis. But with the
price of £172,000 per room, an uplift of 46% progresses.
bedroom stock, institutional investors the first central London hotels to transact closely. The property fundamentals are key. development pipeline slowing, the
compared to the 2019 transaction price. Charles Fletcher, Partner, Specialist
seek to diversify their investment in the following the onset of the pandemic. Property Investment fixed lease market may continue to be
Operationally, the two largest operators
sector. The £10 million sale-and-leaseback Institutional investments target Knight Frank acted for the administrators uu constrained by a lack of stock.
in the fixed-lease market, Whitbread
transaction of the Lamington Group’s development sites, focusing on responsible for the sale, achieving the
and Travelodge, have both rebounded
Room2 Southampton asset, to Aberdeen forward funding deals highest value per room for a trading asset reported £143 million (£388,000 per
strongly post lockdown as seen in their
Standard Investment, where Knight Frank made by a UK Institutional investor and room). Meanwhile, Federated Hermes
Total institutional investment into the recent trading updates and they continue uu
advised the purchaser, is considered to represented the Fund’s first operational entered into two forward funding
UK hotel market totalled approximately to be recognised as two of the most
be a real test of the operator’s covenant hotel acquisition. agreements, a £97.5 million agreement We anticipate a rise in hotels
£750 million in 2021, with an 88% to 12% defensive operators, with an ability to drive
strength, with the deal having completed in with developer Dominvs, for the 400- funded via a forward funding
split between London and Regional UK. Institutional investors provided over occupancy and reduce overheads. The
January 2021, at the start of England's third room Premier Inn Hammersmith and a structure as schemes on
In total, institutional investors (UK and £300 million of development funding, opportunity to offer a durable long-term
lockdown, when visibility for the recovery £35 million agreement with Citygrove hold over the term of the
overseas) accounted for 19% of total UK representing 42% of this buyer group’s income stream, hedged against inflation,
of the sector was extremely opaque.
Securities for the proposed 137-bedroom pandemic are revisited,
hotel investment and was ranked as the investment volume. The deals involved will continue to drive investor interest.
Premier Inn Lambeth development. as well as the continuing
second most active investor group to invest three London sites, totalling some 900
Serviced apartments have remained As evidenced in 2021, an increasing ground rent trend which
profitable throughout the pandemic,
in the sector. rooms, let to Whitbread and a fourth site What does the future hold for
number of operators are competing in allows owner operators
let to Dalata, for the 260-bedroom Maldron the Fixed Lease Market?
thereby proving their resilience and UK institutional investment totalled £430 the occupational lease space, including the opportunity to access
One Park Lane Liverpool development.
robustness. The inclusion of serviced million, despite being 80% below the Historically, Travelodge let-investments Dalata, edyn Group, StayCity, Melia and relatively low-cost capital in
apartments as investment-grade product level of investment in 2019, this investor The largest transaction involved the UK’s have been the most frequently traded Lamington Group, who are all committed exchange for around 15% of
is a trend that will continue well beyond type recorded positive annual net capital largest private pension scheme, Universities fixed-lease hotel assets. The impact of to forging strong relationships with their EBITDA, but still retain
2021 and will serve to elevate the average inflows of around £250 million since the Superannuation Scheme, entering into the Travelodge CVA in 2020 dented institutional investors. AGO Hotels, which full operational control of
transaction price per room further. In pandemic began. This demonstrates that a forward funding agreement to acquire investor confidence however, and we offers a hybrid lease, equity stake and profit their business.
2021, with a notable absence of Travelodge most fund managers were well capitalised the 369-bedroom Premier Inn Paddington saw a fall in demand which resulted in participation, evolved out of the turbulence Charles Fletcher, Partner, Specialist
Property Investment
stock transacting, following the operator’s and positioned to ride out the storm, but an development from Invesco Real Estate and limited activity in 2021, with only seven of the pandemic and will seek to expand its
Company Voluntary Arrangement (CVA), increase in portfolio churn by institutional London-based developer YardNine, for a Travelodge assets trading during the year. portfolio further, but its ability to become uu
6 | Total UK hotel investment volume 2021 - by investor profile Buyers v Sellers
■ Buyer ■ Seller Buyer –average price per room transacted
1,600 350,000
Average Price per Room Transacted (£)
1,400
300,000
Transaction Volume (£Million)
1,200
250,000
1,000
200,000
800
150,000
600
100,000
400
200 50,000
0 0
Private Equity Overseas UK Institutional UK Corporate Overseas UK Corporate UK Private Overseas HNW Family
Corporate Investor Hotelier Institutional Investor Hotelier Corporate Office
Investor Investor Hotelier
Source: Knight Frank Research Hilton Maidstone, the 146-bedroom hotel was acquired by Orida Group, on the basis of obtaining vacant possession at the end of the lease. The hotel will complement the group's
expanding collection of hotels and prestigious golf clubs, all regionally located in the South East of England.22 23
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BLACKROCK REGIONAL UK HOTEL
Sam Farquharson, Vice President, BlackRock Real Assets
TRANSACTION VOLUME BY
GEOGRAPHY AND BY REGION
to long-term investment performance in better than ever. Operators and owners
Why invest in the UK hotel
the hotels sector. have learnt to manage what may have
market today? With many indicators suggesting that transactional activity’s
historically been considered fixed costs.
There appears to be no quick fix for makeup in 2021 was different from recent pre-pandemic investment
Sectors of the UK hotel market offer a Going forward, cashflows are likely to be
the ongoing labour shortages that the activity, our detailed, analysis of where investors targeted their
strong opportunity to capitalise on a managed more efficiently, which should
hospitality sector is grappling. Equally, capital confirms this understanding.
period of growth, with the opportunity help improve margins.
increasing operational and construction
to obtain significant reversion
costs, as well as rising inflation, all Whilst the past two years have been
through improved occupancy and
remain significant concerns for 2022. extremely difficult for the leisure
strong room rates as we emerge from
the Pandemic. This is not true of the Supply continues to be an issue in certain
and hospitality sectors, it has also
provided incredible insight into which
F rom a location analysis of over 170
hotels transacting in regional UK
Edinburgh ranked as the most
liquid city in regional UK for
of smaller valued deals, with an average
transaction price of around £6 million,
whole sector and so there needs to be markets, whilst development might
sectors of the hotels market, and even in 2021 (excluding hotel developments hotel transactions led to the South East Region securing the
a significant amount of caution and a stall in the short to medium term, this
which individual assets, are the most and ground lease transactions), our highest number of hotels transacting.
detailed underwrite when assessing remains on the radar. This is particularly Regionally, the South East of England
defensive and have the strongest pools of research indicates that approximately
opportunities but, in my opinion, the pertinent in city centres which have seen was ranked as the most liquid region Scotland’s prime cities were ranked as
demand. The pandemic has also shown 46% of hotels which transacted, were
right assets will offer a durable long- significant vacancy and redevelopment for hotel investment, with transactions the second-highest region, recording
which assets can minimise costs when located in a rural/resort/coastal setting,
term income stream for investors. opportunity. With large department stores of approximately £420 million. Knight over £335 million of transactions.
required and withhold what has been an whilst city/urban/orbital/business park
being repurposed and hotels often at the Frank acted on behalf of the seller for Edinburgh is the most liquid city in
Whilst historically hotels have been unprecedented impact on trade. locations accounted for the remaining
forefront of this, barriers to entry are lower the asset sales of the 5-star, 228-bedroom regional UK, with some eleven deals
considered within the alternatives 56% of completed hotel sales. Hotels
and certain hotel markets could potentially This insight has allowed investors to Luton Hoo Hotel, Golf & Spa to the Arora transacting at an estimated volume
umbrella, the gap between traditional which transacted in these city/urban/
see large amounts of new supply. really focus in on the right assets and Group and the 215-bedroom Hilton of around £260 million. Edinburgh
sectors and alternatives is becoming ever orbital locations accounted for 69% of the
get live visibility on how specific assets Bracknell sold to KSL Capital. Together accounted for a 78% share of investment
closer. This could continue to become What learning experiences have investment volume, due largely to their
trade in times of turbulence. The strong with the luxury 49-bedroom Stoke Park in prime Scotland and a 15% share of the
less of an issue, as the more traditional come out of the pandemic? increased size and greater value. A review
bounce back in performance during Country Club, these three assets were total Regional UK hotel market, whilst
sectors experience ever increasing of top regional UK cities is somewhat
One of the overwhelming positives to H2-2021 demonstrates the robust nature significant contributors to the total the city of Glasgow accounted for a
amounts of operational leases. meaningless in a year where certain
come out of the pandemic is that hotel of the sector, providing investors with transaction volume in the South East of further 21% of the regional investment.
cities have seen very low numbers or a
Getting comfortable with operational operators have understood their cashflows improved optimism for the year ahead. England. However, the strong number Three of the largest hotels to transact
complete famine in transactional activity.
real estate is a must across all sectors
now and so that is becoming less of a
hindrance for potential investors which
may lead to increased demand and 7 | Regional UK hotel transactions 2021 by UK region
yield compression over the medium
■ Volume ■ Average Price Per Room
term. The medium to long term returns
UK hotel investments offer can be very 450,000 190,000
favourable when compared against
400,000
other sectors. 170,000
Average value per room transactied (£)
Transaction Volume Million (£)
350,000
What are your biggest concerns 150,000
300,000
for 2022?
250,000 130,000
As with most sectors, there will be
200,000 110,000
winners and losers. An increased
widening of the gap in terms of 150,000
90,000
performance between certain locations 100,000
and sectors seems inevitable within the 70,000
50,000
hotels market. Emerging from various
lockdowns over the last two years has 0 50,000
given investors some clues as to the speed South Scotland North West South East Yorkshire & East of Northern Wales Scotland North
East Prime West Midlands West Midlands The Humber England Ireland Secondary East
in which certain hotels can bounce back,
Source: Knight Frank Research
but selecting the right product will be key Hilton Garden Inn, Birmingham Airport, 178-bedrooms, owned by BlackRock, operated by CastlebridgeYou can also read
