According to Savills, the UK hotels market is set for a £3bn sales volume this year, with total sales so far reaching £2.4bn – 2.5 times the volume at the same point in 2012, with at least £600m expected to complete by the year end.
Realistic pricing impacting sales
Robert Seabrook, head of hotel investment at Savills, says: “A growing consensus on pricing has seen more sales complete this year – expectations are that year end volumes will hit £3bn, their highest level since 2007. Additionally, realistic pricing has also increased the speed at which transactions are completing, with accurately priced assets now selling within three to four months as opposed to 10 to 12 months in 2012.”
US investors and UK pension funds
The firm highlights the increasing number of US investors expanding into the UK through the acquisition of portfolios, such as Starwood Capital with their acquisition of Principal Hayley and KSL’s acquisition of Malmaison Hotel du Vin. UK pension funds are also competing fiercely over index-linked hotel leases, particularly when the minimum lease length is 20 years and over.
Regional hotels have turned the corner
Savills notes that occupationally the regional hotel market has turned a corner with its sixth month of consecutive profit growth. According to HotStats, August reported an 11.1% growth in GOPPAR (gross operating profit per available room) year-on-year. Year to date this is a 4.8% uplift boosted by continued improvements in occupancy and rates combined with consistent cost control. Manchester and Birmingham, which benefited from last year’s Olympics as satellite cities, continue to report improvements in GOPPAR, with growth of 19% and 9.7% respectively year on year in August.
London: strong performance
London, however, experienced a dip in GOPPAR and RevPar (revenue per available room) over the same period.
Marie Hickey, associate director of research at Savills, comments: “The strong performance in London hotels in the lead up to the Olympics meant that, despite improvements in occupancy and rates, GOPPAR and RevPar were down year on year. However, when figures from this year are compared to a more traditional year such as 2011, performance across all measures was up including GOPPAR which was up by 49.0% on August 2011.”
Occupancy in London has also continued to improve according to Savills. Despite an increase in supply due to the Olympics, occupancy remains resilient. The research finds of the 7,800 new beds added to existing stock, over half (54%) was in the budget segment and a third were in outer London boroughs where existing supply was limited. The geographical and segment concentration of this new supply suggests that West End four and five star hotel performance should remain robust.
Increased international visitors
Savills reports that international visitor numbers have grown by 3.7% from the same period last year. European and North American tourist numbers dominate but of note visitors from China and Central & South America have grown by 23.7% and 20.2% respectively per annum.