Strong outlook for UK hotels as investment volumes start to rise again

UK hotel property deals bounced back during the first half of 2021 following the sluggish six-month period from July to December 2020, according to real estate business Savills.

Total hotel investment volumes reached £1.7b across 59 deals between January and June 2021, an increase of 135% compared to the previous six months. The figure is below the pre-pandemic five-year average of £2.43b for the same period, but Savills said “the positive momentum demonstrated the robustness of the sector and emphasised the green shoots that are being seen in terms of the UK hotel investment landscape”.

Regional UK assets accounted for 56.9% of investment volumes and 78% share of transactions. US private equity company Blackstone’s acquisition of Bourne Leisure, for an undisclosed sum, accounted for a large portion of deals done during the six-month period. Total investment volumes in London reached £732.1m in the first half of 2021, down 46% compared to the historic five-year average.

Tim Stoyle, head of UK hotels at Savills, said: “While investment in the first half may still be relatively subdued compared to pre-pandemic levels, the outlook for the remainder of the year is particularly promising.

“Regional assets continue to perform exceptionally well underlining the ongoing confidence in the recovery of the staycation segment. Additionally, demand for London assets remains strong, with ongoing investor appetite for prime assets as investors remain positive about a return to international travel over the short to medium term.

“There are a number of notable deals under exclusivity and expected to complete during Q3 and as a result, we are currently forecasting year-end hotel investment volumes to exceed 2020 levels by over 67%.”