Hotel investment volumes increased 84% to hit £4.14b in 2021

Following a bumper fourth quarter when £1.42b worth of transactions completed, total 2021 UK hotel investment volumes reached £4.14b last year, an 84.3% increase on 2020 volumes and just shy of the 15-year average of £4.22b.

The regional UK hotel market experienced a considerable increase in investment in 2021, reaching £2.04b, more than 570% 2020 volumes. Private equity capital, both domestic and international, commanded the regional market, accounting for 62.9% of hotel investment, reaching £1.28b.

Notable deals included Goldman Sachs’ acquisition of the Belfry Hotel & Resort (pictured) for around £140m, and Zetland Capital Partners’ acquisition of the Macdonald Manchester and Holyrood hotels in November.

Key portfolio transactions include Henderson Park’s acquisition of a portfolio of 12 hotels under Hilton brands (Project Conrad) in September, Marathon Asset Management’s acquisition of 17 Holiday Inn and Crowne Plaza branded hotels (Project Horizon) from Cerberus in May, and Blackstone’s acquisition of Warner Leisure Hotels as a part of the wider Bourne Leisure transaction in February 2021.

In London, overseas investors continue to be active, accounting for 44.7% of 2021 volumes, including notable deals such as Singapore-based Fragrance Group’s acquisition of the Holiday Inn Kensington Forum in December. Total 2021 hotel investment volumes in London were £2.10b, up 11% year-on-year, while the number of transactions rose 68.4% over the same period, hitting 32 transactions in total.

Tim Stoyle, head of UK hotels at Savills, said: “The hotel sector has had a resilient year with strong momentum in the final quarter showcasing the appetite for UK hotel assets. While there remains operational challenges in the short-term, investors continue to be positive on the long-term outlook of the sector and we anticipate another strong year in 2022 for the UK hotel investment market.”

Rob Stapleton, head of UK hotel capital markets at Savills, added: “There is a demand-supply disconnect in the market today and whilst 2021 transactions volumes showed an impressive rebound from 2020 levels, the continued relative lack of available hotel stock compared to the volume of capital waiting to be deployed, suggests this imbalance will be an ongoing challenge in 2022. However, the new year has started with positive momentum and we are preparing to launch a number of new hotel instructions to market in the coming weeks, which we anticipate will be well-received by the market.”