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Hotel Sector Posts a Strong Q1

By +Eric Jafari

Hotel Sector PerformanceIt has been a strong Q1 for the hotel sector, with investment volumes nearly quadrupling year-on-year. Savills claims during the first three months of the year investments totalled £1.9 billion. This is almost four times more than the £492 million transacted over the same period in 2012. However, according to Michelle Webb, director of hotel investments at Savills, this isn't sustainable.

"This has been an exceptionally strong first quarter in the hotel investment market, boosted by the sale of three significant portfolios, the Hotel du Vin/Malmaison, Principal Hayley and Marriot which had all been on the market for some time, as well as the recent sale of the InterContinental London Park Lane," she explained.

However, 2013 still has the makings of a vintage year for the hotel sector. There are over £1.2 billion assets currently being marketed across the UK and Savills believes that even if just a small proportion of these are sold this year, transactions will exceed annual levels noted over the past five years.

Overseas buyers are helping to drive the market's performance, accounting for over 90 per cent of the transaction value. US and Middle Eastern investors are proving to have the largest appetites for UK hotel real estate and are looking for portfolios and larger assets. Conversely, Asian Pacific buyers are going in search of smaller, single properties.

The hotel market is also benefiting from a greater amount of financial stability. Ms Webb said: "The main shift over the past six months is that we are finally seeing a consensus between buyers and sellers regarding pricing in the regions, especially with the banks who have become more committed to clearing their balance sheets and realistic about the value of these properties."

This is no doubt helping to drive improvements in the regional market. Earlier this month, the UK Chain Hotels Market Review by Hotstats revealed hotels outside of London experienced revenue and profit growth for the first time since 2009 in February. Revenue per room increased by 1.8 per cent, while total revenue per available room rose by 2.7 per cent. This led to a gross operating profit rise of 1.2 per cent.

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19 April 2013

Tags

Hotel Investments,Hotel Performance