Christie & Co predicts new era of of long-term hotel owners

Following a bumper year for UK hotel transactions in 2017, up nearly 18% year on year to £5.3b, 2018 is likely to show a slight decline in total sales.

However, interest in hotel investments remains strong, with a new set of buyers, particularly from the Far East, showing interest in the market, according to Barrie Williams, managing director, hospitality, Christie & Co, speaking at the publication of the company’s Business Outlook 2018.

“The difference with the new buyers is that they are likely to retain an interest in their investments for longer – maybe a whole generation – than the usual five to seven year time frame before an investor flips them,” he said.

Hotel prices increased by 5.8% in 2017, marginally lower than the 6% rise in 2016.

The largest transactions last year included the £800m acquisition of the 36-strong Jurys Inn portfolio by Swedish hotel investment company Pandox, backed by Israeli-based Fattal Hotels Group from US private equity company Lone Star Funds, and the £525m deal funded by Aprirose to buy the QHotels portfolio of 26 properties from Bain Capital Credit and Canyon Partners.

Whether such large deals will make it over the line during 2018 remains to be seen, but one portfolio that is widely expected to change hands is the 17-strong Grange Hotels collection, privately owned by three brothers, Harpal, Raj and Tony Matharu.

While this year has already seen the largest single asset deal of the last 12 months – that of the 241-bedroom Waldorf Astoria Edinburgh – The Caledonian for £85m – Williams said he is not aware of any other single asset hotels valued at more than £50m coming to market, but highlighted there is a lot of stock around for between £5m and £25m.

In particular, he highlighted that Christie + Co is currently marketing the 154-bedroom Days Inn Liverpool for £12.5m. Meanwhile, the company also has a portfolio of five Marriott hotels on the market, in Bradford, Newcastle, Norwich, Southampton and Sunderland, on behalf of Abu Dhabi Investment Authority.

Easily available debt from banks, financial institutions, peer-to-peer lending and even crowdfunding, together with forecasts of revpar growth of 2.4% in London and 2.3% in the regions will help drive investments. Strong leisure business enjoyed by hotels last year – up 20% – is expected to continue to grow, depending on a continued weak pound

“Going forward, the biggest concern for investors will be costs, particularly food and wages, and what it will mean to profitability,” said Williams.

 

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