Confidence returned across the hotel industry and transactional activity accelerated resulting in average business property prices in the hotel sector increasing by 17.2 per cent during 2014 — that’s according to Business Outlook 2015, the annual state of the markets report by specialist property adviser Christie + Co, just launched.
Christie + Co’s Managing Director Chris Day says: “We saw trading performances gradually strengthen and funding become more available. A number of portfolio deals were transacted during the year and in the majority of cases we were able to drive prices and exceed initial expectations.”
North American investors drive activity
Investors coming out of North America into Europe were principally responsible for driving this activity. During 2014 hotel owners and debt holders rushed to capitalise on the hunger for hotels, which are seen to offer attractive returns and opportunities to add value. Sale prices were driven forward and the sale of 21 Holiday Inn hotels to Kew Green Holdings provided just one example. The deal was concluded on behalf of LRG Holdings by Christie + Co in September 2014, following a highly competitive bidding process.
Dramatic recovery in 2014
The pace of recovery has been very dramatic during 2014, both in terms of investment appetite and trading levels. Looking at data from previous recessions, the recovery curve has never been quite so steep. Buyers have been bidding 10-15 per cent ahead of where guide prices have been fixed.
Looking ahead to 2015, Chris Day feels there is much to be optimistic about: “There remains equity looking for more investment opportunities and plenty of buyers around who are willing and able to complete deals and so we can expect more opportunities to come to market. I think we can expect more single assets to come to market as hotel portfolios are rationalised.
“The condition of hotel assets should also continue to improve, as banks and stakeholders recognise the power of customer feedback and reviews and the necessity of capex.”
80th year of operation
This year will be the 80th year that Christie + Co has been operating but it still manages to break achievement records. During a single week in 2014, it sold 42 hotels with a total value of more than £500 million – the busiest week that the company has ever had in this sector. Demand for its expertise and insight continues to grow which was demonstrated when a portfolio of assets was offered to 16 potential buyers during the year and Christie + Co was approached by no less than 12 of them to provide buy-side insight.
It all bodes well for another very busy year in 2015.
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