Asian investment to ‘dominate’ UK hotel market in 2017

UK hotel transactions hit a nine-year high of £8bn in 2015​ driven by a spate of major deals.

But according to HVS’ quarterly Hotel Bulletin report, market activity in Q3 of 2016 has totalled just £522m, less than half that recorded in the same period last year.

HVS predicts that activity in the sector is likely to remain ‘subdued’ until the terms of Britain’s exit from the European Union became clearer.

“There is still no strong indication of what form Brexit will take and this uncertainty has led to indecision and delays in hotel property transactions,” said HVS London chairman Russell Kett.

Interest from the East​

But despite ongoing economic uncertainty, the UK is continuing to attract interest from Asian investors.

A Deloitte survey of more than 100 senior hospitality industry leaders found that 62 per cent see China as the biggest source of future investment in Europe.

This year has seen Hong Kong’s YT Realty Group acquire a partial interest in a London Travelodge from Goldman Sachs for £42m, while China’s Junson Capital bought the DoubleTree by Hilton London Docklands Riverside​ for a reported £80m.

Deloitte said Asian capital was expected to ‘dominate’ activity in the sector in 2017, with more than a third of industry leaders predicting that the European investment cycle is 12-18 months away from reaching a new peak.

“Interest in UK hotels, particularly in London, is still relatively strong,” said Kett.

“We expect transactions will rise in the latter part of 2017 as the terms of the UK’s exit from the European Union become clearer following the expected triggering of Article 50 in the spring. By this time much of the uncertainty should have dissipated and investors’ confidence in acquiring UK hotels should have improved.”

Industry leaders also predicted a rise in domestic investment in regional UK destinations next year, with Edinburgh and Birmingham named as the top cities to invest in outside of London.