Tag: investment

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2020 set for record investment into London hotels

The volume of investment into London hotels could reach record levels in the first quarter of 2020, with approximately £1.5b expected to transact in the capital, according to international real estate advisor Savills.

Rob Stapleton, director at the Savills Hotels team, said: “Investor confidence in the UK hotel market remains high and while political uncertainty in 2019 had an impact on overall deal volumes, yields remained low highlighting that, for the right assets, the UK continues to be a key focus for emerging hotel brands and international capital.

“We have already noted a marked increase in investor enquiries since the General Election result and anticipate this to translate into increased investment activity across the UK hotel market in 2020, with several notable transactions expected to transact in the first half of the year.”

Savills has recorded that UK hotel transactions reached £4.64b in 2019, down 42% year-on-year but 11% above the 10-year average. The number of transactions across the country was also down 47% year-on-year and 6% below the average.

Overseas investors were accountable for 59% of market share, with the top three by country being, Hong Kong (c. £1b), Thailand (c.£450m), and Israel (c.£260m). Portfolio transactions accounted for 52% of investment activity in the UK, similar to 2018’s 53%.

Transactions into London totalled £2.31b, accounting for almost 50% of all UK hotel investment activity. Savills recorded the total volume for the rest of the UK was around £2.33b, representing a 16% (South East), 20% (North), 9% (Scotland) and 6% (South West) regional split.

Key single asset deals in 2019 included: Harrington Hall, sold to London Central Portfolio and ACP off a guide price of £130m; the freehold of the Sofitel London Gatwick which changed hands for a reported £150m; and the Crowne Plaza Kensington, sold to a Singapore consortium led by Heeton Holdings for £83m.

Key portfolio deals included: four Grange hotels sold to Queensgate Investments for £1b; ‘Project Mauve’ (17 InterContinental Hotels Group, Marriott and Hilton hotels were sold to DTP Infinities Corporation for a reported £450m); and Topland’s sale of the Hallmark portfolio for £250m.

Tim Stoyle, head of valuations at the Savills Hotels team, added: “Looking forward to this year we expect to see more stock coming to market across all grades of accommodation but primarily driven by demand for the budget and four-star segments.

“Demand for these assets in London and in core locations across the rest of the UK will be underpinned by the operational performance resulting from the growth of the staycation market, as well as the continued growth in international tourist numbers.”

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Investors remain optimistic as more than 200 hotels under development in London

There are 210 new hotels in the development pipeline for London as investors remain optimistic about the capital’s market potential for growth post-Brexit.

That’s according to a new study by private wealth law firm Boodle Hatfield. Almost a quarter (48) of the hotels with planning permission or already under construction in London are located in Westminster, adding more than 6,800 new bedrooms. Luxury and boutique hotels account for 74% of the planned new hotels in Westminster.

These include: the former US Embassy in Mayfair, which is being developed into a 137-room, £1b Rosewood hotel; a Nobu hotel is being built in Marylebone that is part funded by Hollywood actor Robert De Niro; and the Londoner on Leicester Square, which will have 350 rooms and two cinemas.

A further 12 hotels are planned for the Heathrow area.

The UK’s hotel market is one of the few sectors of the UK economy to have benefited from the Brexit-related slump in sterling, the law firm said, because the decrease in value of the pound has made it cheaper for international tourists to visit the UK and has also encouraged more “staycations”.

Rajeev Joshi, partner at Boodle Hatfield, said: “Investor appetite in the London hotel market is holding up. But investors will want to know that this new supply of hotels can be soaked up by increasing demand.

“For tourism to continue to grow, the UK needs to ensure that post-Brexit, we do not start to be seen as a less convenient destination for tourists from the EU or from further afield. Greater investment in infrastructure will be a key part of this. Accelerating the delivery of projects such as the third runway at Heathrow and the Crossrail would help.”

Top 10 areas for hotels currently in development across London:

BoroughHotels with planning
permission		Hotels startedTotal
Westminster272148
Hillingdon
(Heathrow Airport)		8412
Brent4711
Tower Hamlets5510
Kensington &
Chelsea		549
Hammersmith &
Fulham		549
Hounslow549
Redbridge729
Camden639
Hackney718
Total7955134
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Amaris Hospitality to boost five hotels with £21.7m refurbishment

Hotel investment and management group Amaris Hospitality has announced it will invest £21.7m into the transformation of properties in Edinburgh, Islington, Oxford, Bristol and Dublin.

The company will spend more than £6m on the refurbishment of 230 of the 373 bedrooms at the DoubleTree by Hilton hotel in London’s Islington, with the aim of bringing all accommodation up to four-star quality.

It will see Five Feet to Fitness rooms introduced to the hotel, which the company claimed to be a first for Europe. Featuring 11 different fitness and accessory options, the new concept offers guests the option of exercising in the privacy of their own room.

The Islington transformation project follows significant investment in the 2014 rebranding of the property from Jurys Inn to a DoubleTree by Hilton, when £13m was spent on the addition of 143 new bedrooms.

A further £2m will be spent on the Group’s DoubleTree by Hilton hotel at Edinburgh Airport, where all 150 bedrooms will be refurbished and a new food and beverage concept introduced. Amaris said the hotel will be the only four-star property at Edinburgh airport when works complete early next year.

Other work being undertaken includes the £500,000 renovation of 40 bedrooms at the Mercure Bristol Grand Hotel, and £2.5m being invested in the addition of 17 new bedrooms at the Mercure Oxford Eastgate Hotel.

Amaris Hospitality also recently completed a £10.5m extension to the Hilton Garden Inn hotel at Custom House Quay in Dublin, adding 85 new bedrooms to create a total of 324 rooms.

Peter Stack, chief executive of Amaris Hospitality, said the investment investment programme was a key part of the company’s “ambitious growth strategy to build a unique portfolio of high-performing, best-in-brand hotels”.

He added: “We are very excited to be the first hotel in the UK to embrace Five Steps to Fitness rooms, just one of the examples that illustrates our commitment to leading the way in industry innovation across our estate, ensuring our guests have access to best-in-class amenities.”

The investment programme is scheduled to be fully completed in the first quarter of 2020.

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Asia-Pacific investors boost UK hotel spend over £1b

Investment into UK hotels has reached £3.22b in the first three quarters of the year, with Asia-Pacific buyers particularly active.

According to new research from Savills, despite volumes being down around 44% on the same period last year, the numbers are up 11.3% against the 10-year average of £2.89b.

This year has seen 97 deals take place according to the firm, a decrease of 49% from the 190 that took place in the same period in 2018. Overseas investment has accounted for £1.87b of investment so far this year, exceeding the 10-year average of £1.4b by 38%. While some international buyers have reduced activity levels this year, there is still significant interest and purchasing activity by buyers from Asia Pacific.

Asia-Pacific buyers have been the most active overseas investors to date in 2019, spending a total of £1.08b, representing 56.9% of total overseas activity. This is a tenfold increase compared to the volumes recorded over the same period in 2018 (£93m). The volumes are at their highest for the first three quarters of the year since 2015 when transaction volumes reached £1.13b.

Hong Kong investors have been the most prolific, spending a total of £947m to date this year (87.7% of total Asia Pacific volumes) making it the highest year on record in terms of hotel investment from Hong Kong buyers.

In terms of where capital is being spent, London attracted the most investment into the UK with £1.98b spent in the capital. The north followed with £465m, the south east at £430m, Scotland at £225m, the south west at £110m.

There has been an even split between portfolio and single asset transactions, with portfolios attracting £1.7b (53% of the total) and individuals £1.5b (47%).

Rob Stapleton, director in the hotels team at Savills, said: “Deal volume this year has undoubtedly been affected by global political uncertainty and wider global macro issues… while the UK’s regional markets have seen lower transaction volumes so far this year, we expect the ripple-effect of historically low yields in London to encourage investors into the more stable regional markets in the search for yield.”

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Local councils spend record number on hotels

Local councils in Britain have spent record amounts on buying hotels, spending £93m in 2018, an increase of 182% on 2017’s £33m.

This demonstrates the increasing appetite for local authorities to capitalise on low-interest central government loans to purchase commercial property to fund major projects or stimulate regeneration, according to the latest research by global property adviser Knight Frank.

Examples include the acquisition of the 212-bedroom Croydon Park hotel (pictured) in London by the London Borough of Croydon for £29.8m last year; and Scarborough Borough Council snapped up the 140-bedroom Travelodge St Nicholas in Scarborough in October 2018 for £14m.

Shaun Roy, head of hotels at Knight Frank, said: “With the growing acceptance that councils need to seek new means of funding to cover budget shortfalls, we have seen many local authorities make the intelligent move of investing in hotels.

“Significant opportunity exists for councils to invest in hotels and we expect this trend to continue until 2021 when this method of borrowing will end due to new government legislation.”

Knight Frank’s research reveals over £600m of investment is already planned up until 2023 through private-public partnership schemes, where hotels form the primary focus in a development project and which have either outline or detailed planning permission granted.

Where hotels form part of a larger mixed-use scheme and are secondary to other larger publicly residential or commercial elements, the value of projects with detailed plans either granted or submitted rises to £1.8b.

Examples include the City of Liverpool, which has brought to market a number of mixed-use development schemes including the development of the Titanic hotel in 2014, the opening of a new exhibition centre and four-star Pullman hotel in 2016 and the 2018 opening of the 101-bedroom, Premier Inn in central Liverpool as part of a £39m mixed-use regeneration project.

Similarly, Dundee City Council recently opened the 120-bedroom Sleeperz hotel under a lease agreement, which forms part of a £28.5m redevelopment of Dundee Railway Station. A second development in the city, subject to planning, is expected to deliver a proposed 150-bedroom AC Hotel by Marriott, where Dundee City Council is understood to retain full ownership upon the hotel’s completion.

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‘Unprecedented’ growth boosts UK hotel investment to £7.4b

Investment in the UK hotels industry hit £7.4b in 2018, a £1.7b increase year-on-year, a rise of 29% and 102% above the 12-year average.

That is according to the latest research by global property adviser Knight Frank. The “unprecedented” growth in 2018 was due to a 50% increase in international investment, with overseas buyers responsible for £4.9b invested into the UK hotel market. There was a 50-50 split of the capital invested between London and the UK regions.

UK investors were responsible for a third of the investment (£2.5b), European investors 27% (£2b) with £1.6b from France. Inbound capital from the US increased by 77% to £1.5b (21%), due to significant institutional interest.

London continues to remain an attractive target with total investment climbing to £3.3b. The acquisition of hotel sites and the forward funding of hotel projects equated to 21% of the total investment. The interest from international investment was the leading driver of the capital’s hotel market, accounting for £2.4b of total investment.

Outside of London, Edinburgh was ranked the most attractive regional UK city for hotel investment, accounting for transactions totalling around £525m with a 13% share of the UK regional investment market.

A new trend that emerged in 2018 was the increase in activity from local authorities, capitalising on low-interest central government loans to purchase commercial property. In 2018, local councils invested a record £93m in the hotel sector, an increase of 182% on 2017 (£33m).

Shaun Roy, head of hotels at Knight Frank, said: “With rising interest rates and prolonged Brexit negotiations, there is a strong demand for secure, long-term fixed income assets which has led to an increase in investment in hotels.

“The capital continues to remain an attractive destination for global and domestic investors, with opportunistic hotel investors stimulated by the attractive levels of growth prospects in London over the long-term.

“Furthermore, the proportion of capital allocated to specialist property is evident from the growing trend for the inclusion of hotel real estate in institutional funds. There is now a much greater understanding of the fundamentals of hotels as a specialist sector, which has led to over £1.1b invested in hotel development and forward funding for future hotel projects.

“We envisage further inbound investment, should sterling weaken further following the UK’s exit from the EU. Overseas capital flows and institutional investment is expected to remain buoyant as greater strategic importance is placed on investing in alternative specialist sector businesses

“Thus far, the pace of investment in 2019 has been strong, with London in the alluring position of being the world’s most liquid and transparent real estate market, cementing its reputation as a safe haven for international capital.”

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2019 will continue to see high levels of cross-border investment

The strong levels of cross-border investment into the European hotel market – which reached $4.9b (£3.8b) in 2018 – will continue in 2019.

The JLL’s Hotel Investment Outlook 2019 predicts that, despite political uncertainty, tourism and business fundamentals remain solid thanks to strong infrastructure developments in the region, which will continue to attract international investors towards strong assets and opportunities in these markets.

Germany and the UK account for nearly 60% of pipeline rooms currently under construction and are expected to absorb additional supply in the medium term due to strong tourism growth forecasts.

The report predicts that the European hotel market will be driven mostly by single asset deals, with portfolio trades expected to reduce, given the significant volumes of transaction of this type seen over the past two years. Overall investment volumes across Europe, the Middle East and Africa are expected to soften to $21.2b (£16.3b) from $22.9b £17.6b) in 2018.

It also predicts the sector will see new investors emerging, with diverse sources of core and core-plus capital are increasingly considering investment in the hotel market, and an increase in hotels entering the flexible workspace market transforming hotel lobbies into communal workspaces.

Philip Ward, EMEA CEO, JLL Hotels & Hospitality Group, said: “Political uncertainty and the volatility in equity markets will test investors’ sentiment throughout the year. However, we expect hotel investment volumes to hold steady on 2018 levels owing to hotels’ attractive yield profile compared to other sectors.”