2018 Outlook for UK Hotel Investment

Golden Properties discovered that UK cities saw unprecedented hotel performance throughout 2017 and 2018 and they expected to see further growth in looking ahead to 2019. Strong demand has propelled hotel investment into the spotlight yet again. Global GDP growth, together with strong travel and tourism trends, pave the way for an extended cycle of positive hotel operating performance and investment prospects.

A range of investors, including private equity, insurance companies, and pension funds, are attracted to the higher yields offered by hotel real estate compared to other fixed-income products in a low-interest rate environment. This is evident by their increased allocation to real estate in general, a trend which will continue throughout 2018 an into 2019.

 

Both JLL and Savills reported increases in hotel transactions for 2017 with Savills forecasting that annual UK hotel investment volumes will reach £5.1bn by the end of the year (2017), 25% up on what they believed to have been the 2016 total of £4bn. Interestingly Savills also reported that overseas investors accounted for 38% of hotel transaction volumes in the UK regions in 2017, up from a 7.3% share in 2016.

 

“Tourism is one of the UK’s most valuable export industries. It is also a fiercely competitive global industry and these results not only demonstrate Britain’s continued ability to compete internationally for visitors, they are testament to tourism’s importance as a driver of economic growth.” – Julian Troup, Head of UK hotel agency at Colliers International.

 

CBRE’s 2018 Market Outlook expects the UK property sector to continue to perform solidly with the so-called “beds sector” which includes hotels, weathering any uncertainty well. JLL’s UK Property Predictions 2018 reports that almost a third (32%) of hotel investors expect millennials to drive business for the hotel and leisure sector over the next five years with investors now much more comfortable with hotels as an asset class, no longer viewing them as ‘alternative’.

 

“While some property sectors will see extremely patchy growth performance, the rise and rise of Industrials & Logistics looks likely to continue, and the ‘beds sectors’ like hotels, built-to-rent and healthcare are also set to grow strongly.” – Miles Gibson, Head of UK Research at CBRE.

 

This sentiment is echoed by Colliers International who view hotels as an “attractive and popular” investment opportunity despite Brexit uncertainty and in fact, a weaker sterling is expected to attract even more international buyers to UK hotels, especially those located in the provinces, over the next 12 months.

 

Why invest in hotel rooms?

There are numerous appeals of investing in an alternative property asset class such as hotel rooms. Not least the counter cyclical nature of alternative investments such as these which attract savvy investors often priced out of mainstream sectors and looking for higher yields than more traditional property asset classes such as residential property, offices and retail.

Of the respondents considering investing, developing or lending to alternatives in 2017, surveyed for the JLL UK hotels forecast 2018, 51% favoured hotels. Other appeals of hotel investment include the hands off and hassle-free aspects of room ownership.

Unlike owning your own hotel or B&B and all the hard work associated with running such an operation, hotel room investors can sit back and relax whilst the management team market, manage and maintain your room.

Investment Spotlight:

The Penrallt Country House Hotel & Spa

  • Four star hotel in a prime location
  • Guaranteed 10% ROI per annum
  • Clear exit strategies
  • Low entry level

 

Feature investments