UK hotel transactions of £1.5b dominated by regional deals

12 August 2014 by
UK hotel transactions of £1.5b dominated by regional deals

Hotel transactions in the UK, which totalled £1.5b during the first half of 2014, were dominated by regional deals, according to new research from accountancy firm Deloitte.

While business was up 65% on the second half of 2013, completed sales were down, year-on-year, from £2.2b. There is still some way to go to reach the highs achieved during the 2006 peak when a total of £6.3b worth of transactions took place.

So far this year, the regions have proved to be particularly busy, with 60% of transactions having been completed between January and June outside of London. Business has been driven by the offloading of assets by banks, distressed sales, the scarcity of London deals and improved trading conditions, alongside the increased availability of funding.

The sale of the Four Pillars group in January for £90m and De Vere Venues in March for £232m; both acquired by Starwood Capital, was followed by two former Akkeron Hotel portfolios changing hands after entering administration (five leased hotels to West Register and the 14-strong Forestdale portfolio acquired by Somerston through St. James's).

In just the past week, a portfolio of 11 hotels operated by QMH for a reported sum of around £130m has been acquired by American investment company, Marathon Asset Management, alongside the completion of two major single asset deals: the five-star, 107-bedroom Cedar Court Grand Hotel & Spa in York - bought by the Splendid Hospitality Group for an undisclosed sum, and the 209-bedroom Novotel Liverpool Central - sold to Brussels-based investor Algonquin for £12m.

Nick van Marken, global head of hospitality at Deloitte, said that the buoyant economic climate has finally caught up with the desire for investment in the hotel sector.

"This is the second strongest start to a year since the peak in 2007," he said. "We anticipate continued strong interest from investors but a potential lack of product given the substantial capital the market has to deploy."

Looking ahead to the rest of the year, van Marken said that the UK hotel sector is firmly back in favour.

"We see many international buyers, especially from the US, Middle East and Asia, showing continued strong interest in London, and increasingly in the regions," he explained. "We expect deals will close more quickly in the second half of 2014 with significant appetite on the part of private equity in particular."

Major transactions set to be tied up by the end 2014 include a five-hotel strong Hilton Worldwide portfolio, a number of Holiday Inn hotels owned by the LRG consortium and operated by Canadian group Realstar, and the collection of seven De Vere Hotels and 25 Village Urban Resorts. The sale of London's Grosvenor House is also expected to take place after. Its owner Subrata Roy, who is currently in jail for allegedly raising money through an illegal retail bond scheme, needs to sell the iconic five-AA-star, 494-bedroom hotel in order to raise funds to secure his release.

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