Positive signs on the horizon for the UK hotel sector with the largest increases in activity since Q1 FY2023 reported.
In Q1 2024, UK hotel investors transacted approximately £1.7 billion in real estate, a 138 per cent surge from Q1 2023, according Cushman & Wakefield.
Ninety-three properties across the UK, totaling approximately 7,600 rooms, were transacted.
Two significant portfolio deals—the Edwardian UK Radisson Hotel Portfolio and the LXi REIT Travelodge Portfolio—made up 60 per cent of the transaction volume.
Capital deployment
- Private buyers completed 69 per cent of deals
- 23 per cent were public investors
- 8 per cent from institutional capital
Throughout the quarter, London dominated major deals by volume, constituting 60 per cent of transactions.
Notable sales included Atlas House to Integrity International Group and the iconic BT Tower to MCR Hotels.
These transactions highlight the ongoing interest in office-to-hotel conversion projects, which remain a significant portion of deal flow.
State of the market
The market anticipates a continued positive sentiment for the sector, supported by increased consumer confidence.
Additionally, leisure demand for hotel nights in the UK is projected to grow by a further 6 per cent this year.
While hotel supply growth is expected to continue, it is forecasted to slow down compared to the previous two years.
UK-wide room supply has only increased by 0.2 per cent since the beginning of the year, with approximately 24,000 rooms still under construction.
Ed Fitch, head of hospitality UK & Ireland at Cushman & Wakefield, said: “The last 18 months have seen the UK sustain elevated levels of hotel performance, which now appears to be stabilising as the new standard. The bid:ask spread continues to slowly narrow.
“There is strong capital interest in the sector, yet deal flow remains constrained by a lack of product on the market whilst buyers are adopting a wait-and-see approach anticipating base rate cuts in H2 2024, against the backdrop of an impending UK election.
“From a yield perspective, we see that they remain stable against those established at the close of 2023.
“Toward the back end of the year, a slow and steady sharpening in line with the gradual reduction in base rates can be expected, although reversion to historic lows of the 2010s is unlikely.
“The enduring ‘flight to quality’ continues to dominate the UK hotel investment, with 69% of deal flow amongst luxury and upper upscale hotel classes.
“This serves to heighten competition for opportunities in prime locations and maintain a consistently stringent yield environment for premium assets.”
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