Despite a difficult year due to COVID-19 restrictions, the UK hotel sector remains resilient and will will start bouncing back in 2021, according to a business outlook report published by Christie & Co.
Multiple lockdowns, forced hotel closures and travel restrictions have had a severe impact of the hotel sector across the UK, but there is cautious optimism for a recovery in 2021 while government support remains in place and the vaccine rollout bears fruits.
The UK remains a market of interest for hotel investors: “Investor demand is still very robust for hotel businesses and speculative buyers continue to actively chase well-placed opportunities in the current market” the report says. “Buyer appetite remains strong and we are seeing demand for a range of hotels including large branded assets or under-invested assets with potential for repositioning or conversion to other uses, as well as assets located in leisure destinations, where we saw trade pick up significantly during summer.”
The leisure market, in particular rural and coastal destinations, has benefitted from the staycation trend. “Buyers seeking to capitalise on the “staycation” boom are predominantly domestic, cash funded and willing to take a long-term view on the current uncertainty surrounding the sector.”
So far, governmental measures including VAT cuts, grants, rates relief and rent moratoria have provided support to many businesses, but as the support eases it is expected distress is likely to emerge within the sector. When this happens, “there is a wall of capital waiting for larger opportunities which have been limited to date”.
When will the market recover? “The ongoing vaccine rollout will drive recovery of the staycation market from Q2 2021 whilst international and corporate demand should slowly materialise during H2” says the report. “Subject to adequate supply, we anticipate heightened M&A activity during 2021. The pandemic is likely to result in the permanent closures of smaller, unviable hotels across the country; however we anticipate strong demand for these non-trading sites from a variety of alternative uses.”
Darren Bond, Global Managing Director of Christie & Co concludes “I am confident that our markets have some incredible characters and determined individuals. We expect the majority of businesses will bounce back as COVID-19 starts to recede, however, the longer the restrictions continue, the harder it may be for those without further financial support.”