Transactions in the U.K. hotel market are likely to be subdued until the implications of Britain’s exit from Europe become clearer and business confidence returns, according to the latest Hotel Bulletin.
The bulletin, published recently by HVS, AlixPartners and AM:PM, noted that Q3 hotel transactions in the U.K. totaled £522 million, nearly half of the year-earlier period. Total transactions year-to-date were also significantly below that of last year.
“While the sterling depreciation recorded since June will have materially impacted overseas investors, many will be looking to take advantage of favorable exchange rates, making it a good time to buy in the U.K.,” said HVS London Chairman Russell Kett. “However, economic uncertainties in the U.K., such as a rise in inflation and the potential of rising costs, means that decisions are instead being delayed.”
He added, “The other impact we have seen is that investors with existing portfolios in the U.K. will have recorded significant valuation declines when converted into their home currencies.”
The quarterly Hotel Bulletin notes, however, that Asian investors have maintained their interest in the UK market. This year has seen Hong Kong’s YT Realty Group acquire a partial interest in a London Travelodge from Goldman Sachs for £42 million, while China’s Junson Capital acquired the DoubleTree by Hilton London Docklands Riverside for a reported £80 million.
Other Q3 events:
- The sale and leaseback of the hub by Premier Inn development at King’s Cross for an estimated £85 million by Legal & General
- The U.K.’s tourism and hospitality sectors’ short-term boost from the depreciated pound and the rise in foreign exchange movements
- An increase in hotel bookings in popular tourist locations
- Weaker growth for hotels relying on corporate business