Savills expects bumper Q4 for UK hotel real estate

City View of London around Liverpool Street station
City view of London around Liverpool Street station. (VictorHuang/Getty Images)

Insight Comment
Aside from the start of the year, things look like they’re back to normal in the UK real estate investment market. However, given all the uncertainty surrounding inflation and supply chains, 2022 might be more challenging than many people originally thought.

The outlook for the hotel investment market remains relatively strong, with a large amount of equity in the market ready to be deployed, according to the international real estate adviser Savills. 

  • Total 2021 year-to-date (Q1-Q3 2021) UK hotel investment volumes reached £2.66 billion, up 18.7% compared to the full-year 2020 volumes. 
  • Savills is forecasting a further c.£1.34 billion worth of hotel assets to be transacted in the final quarter, bringing 2021 year-end volumes to c.£4 billion, close to the 15-year average of £4.22 billion, while up 78.2% compared to 2020 volumes.
  • UK hotel transactions reached £935.1 million in the third quarter of this year, more than treble the volume recorded in Q3 2020, and up more than a fifth (20.6%) compared to Q3 2019. 
  • Strong demand since reopening has meant that both Q2 and Q3 2021 volumes exceeded the corresponding quarters in 2019. However, due to a slow opening quarter of the year, year to date volumes remain down -25.2% compared to 2019 equivalent levels. 

Demand for regional assets has continued, accounting for almost two thirds (65.6%) of total volumes year to date. Two major portfolio deals have formed a great deal of this, including Blackstone’s acquisition of Bourne Leisure and Henderson Park acquiring a UK-wide Hilton portfolio.

London has dominated single asset hotel transactions, accounting for two thirds of total UK single asset volumes, equalling approximately £890 million. This represents a 59.3% increase compared to 2019 volumes over the same period and demonstrates the continued level of investor appetite for prime London assets. 

What They Said

Tim Stoyle, head of UK hotels at Savills: “Following what was a slow start to the year we have experienced strong positive momentum for hotel investments and expect to finish the year over 78% ahead of 2020 volumes. Investors continue to remain positive as the staycation market boosts regional performance and the return of international travellers providing a welcome boost to our city centre hotels. We expect much of the capital that has been raised to be deployed in the sector as confidence in the outlook of the sector grows.”

Rob Stapleton, director in the hotel capital markets team: “As traveller sentiment continues to improve and the economy opens up, London is set to be a major beneficiary. Investors continue to be drawn to prime assets and with limited stock and high levels of liquidity in the market we expect strong demand and competition for the best assets.”