The hotel industry in 2016 will see significant market opportunities through the break-up of portfolios and increasing sale and leaseback activity, despite disruptive issues taking place in the industry, according to research from Knight Frank.
Having set new benchmarks in the last year, investment volume in hotel property accounted for 8.29% of total UK commercial real estate volume at £5.89 billion in 2015, as investors sought long-term defensive asset classes, with key deals including Brocket Hall in Hertfordshire. The increase in investment volume in hotels has more than doubled since 2013 from £2.21 billion, and represents the highest figure to date, even overtaking the market high investment volumes of 2006.
Momentum will continue across the hotel sector as Knight Frank predicts that operator consolidation will also be evident in 2016, allowing the industry to respond to threats from disruption taking place in the sector, such as home sharing sites and online travel agencies having increased prominence.
Ian Elliott, Head of Hotels, Knight Frank, commented: “In 2016 despite emerging challenges, we expect that the hotel industry will continue to witness strong results as investors look for better returns on their investments. The investment volume pattern of the last three years in addition to an expected increase in regional developments suggests that 2016 could be another record-breaking year for the hotel industry.”
This increased momentum within the hotel industry follows a wider pattern of a significant shift to the non-traditional asset classes by investors, as buyers now view specialist sectors as a ‘defensive’ asset class – providing long, stable income flows. Eighteen per cent of all commercial property investment transactions in 2015 were in specialist property and Knight Frank predicts that total investment into these sectors will increase by 10% year on year to reach £14.3 billion by the end of 2016.
All four core specialist sectors – hotels, healthcare, student property and automotive – saw volumes exceed their five and ten year averages in 2015. Since 2006, £46.6bn has been invested into these sectors, with a record £13bn invested in 2015 alone.