UK stays in top spot for hotel investment

28 January 2014 by
UK stays in top spot for hotel investment

The UK remains the leading market for hotel investment, according to a new report by Jones Lang LaSalle.

The company's Global Hotel Investor Outlook 2013 showed that the UK attracted a 37% share of Europe, Middle East and Asia (EMEA) hotel investment volume in 2013.

The report said trading and sentiment has improved and market confidence has been boosted by a number of key global investors underwriting the UK market through portfolio acquisitions and refinancings, including the Abu Dhabi Investment Authority (ADIA), Starwood Capital, KSL Capital Partners and Mount Kellett.

The report forecast that hotel investment volumes would climb by 20% in 2014, thanks to banks continuing to sell "over-leveraged" assets, and private equity funds disposing of assets as their investments reached the end of their life-cycle. It also predicted an increasing appetite among UK domestic banks such as RBS, Lloyds and Barclays, as well as overseas banks such as the Bank of China and a number of Middle Eastern banks, to lend to the hotel sector.

Revenue per available room (revpar) in London is expected to rise by around 4% in 2014, a more positive result than 2013 when London trading was impacted by additional supply and by comparison to the Olympic year. An additional 45 properties, with approximately 6,000 rooms, are set to enter the London market in 2014, 60% of these in the budget sector.

Regional UK hotels are also expected to see some top line growth although the challenge here remains at the profit level, with costs often increasing faster than revenue. However, the speed of GDP growth should underpin business confidence and drive rate growth through a shift in room segmentation.

Jonathan Hubbard, chief executive of Northern Europe for Jones Lang LaSalle's Hotels & Hospitality Group, said: "The familiarity and maturity of the UK will provide good opportunities for investors in 2014 and will drive more value. As a result of this, we will see competition heating up and investors that miss out on the prime core market opportunities will start to focus on the secondary markets in those countries where they will tap broader opportunities and better returns. It's a very positive picture for the EMEA region and particularly for London and the UK."

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