UK hotel transaction volumes set to increase in 2023

Transaction volumes for UK hotels is set to grow in 2023 after a subdued level of investment in 2022, research from Knight Frank has found.

The property consultancy noted UK hotel transactions in 2022 totalled £3 billion, 31 per cent below the five-year average and 22 per cent below 2021’s investment levels. Over the last 12 months, there were lower levels of sizeable asset transactions but an increase in the volume of transactions of lower-valued stock, with 76 per cent of single asset hotels transacting below £10 million, at an average lot size of £4.3 million.

Knight Frank found that although there was a 55 per cent increase in regional, independent UK hotels transacting, the average selling price of £7.1 million was lower than 2021’s average price of £9.5 million.

Positively, the newly published research predicts growth in transaction volumes especially during the second half of 2023, driven by more stable market conditions and a large amount of capital seeking to target the hotel sector.

Knight Frank added that increased visitor numbers to the UK – forecast to total 35.1 million in 2023, with visitor numbers to be 18 percent higher than the last twelve months – will particularly benefit hotels in markets with strong overseas demand such as London and Edinburgh.

Several sizeable hotel deals have already transacted at the start of 2023, with over £230 million of investment.

What they said

Henry Jackson, head of hotel agency at Knight Frank said: “As confidence in the direction of the UK economy is further restored, there will come a greater urgency and decisiveness to execute a transaction. Currently, a heightened level of price sensitivity continues, yet the lack of quality branded stock available may serve to increase competition for assets, thereby protecting or even driving-up values in the short-term.”