UK hotel transactions in H1 down significantly year-on-year

UK hotel transactions in the first half of 2023 totalled around £825 million, according to data from Savills.

According to Savills, the £825 million was dominated by private investors, who are less driven by debt and more focussed on wealth preservation and the inflation hedge that hotels can offer.

This is a significant underperformance when compared to the first half of 2022.  In its report titled The UK Hotel Market: New challenges on the road to recovery, Christie & Co revealed that a total of £1.9 billion was spent on UK hotel transactions in H1 2022.

Positively though, looking forward, Savills says it believes investor momentum will increase in the second half of the year as the bid-ask spread continues to tighten, which will drive annual transaction volumes closer to long-term averages.

It added that the fundamental demand drivers for UK hotels remain unchanged, with a 19 per cent increase in global air passenger demand on 2019 levels forecast by 2025.

The return of international travel has meant that London and Edinburgh were the strongest city performers this year to date and will continue to be moving into 2024, with their average daily rates up 19% and 20% respectively.

What they said

Rob Stapleton, head of UK Hotel Capital Markets at Savills said: “We have seen momentum building during the first half of the year, as operational performance has continued to improve. There is significant investor appetite and a willingness to do deals, both on the vendor and purchaser side, where the requirements and returns align. With the volume of transactions currently on the market and also being readied for sale, a narrowing bid-ask spread will facilitate greater volumes of transactions in the second half of the year.”

Tim Stoyle, head of UK Hotels at Savills added: “Following the pandemic, we’ve seen a real bounce-back in the sector, which arguably has the best growth story from across the real estate spectrum and has therefore caught the eye of investors. Although the current cost of debt continues to be a major topic, we expect to see an evolution in the profile of investors into the sector, particularly as expectations around yield softening materialise and the sector continues to deliver operationally.”