Is the UK’s hotel sector the next big property investment?

Is the UK’s hotel sector the next big property investment?

Short-term economic uncertainty, political uproar and frustration… these are definitely three things Britain’s Brexit vote kicked off. What it also brought, however, is a weak pound and a big interest from European tourists.

The country’s decision in the EU referendum to leave the Union once and for all has led to a dramatic drop in the value of the British Pound, leading a lot of European tourists to cease the opportunity and spend a couple of days in the country that’s just decided to divorce them.

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PwC picked up on this trend and has published a study predicting an occupancy rate of 77% in rural hotels for 2017. On top of that, the study revealed record occupancy levels for rural hotels for this year and a 2.3% revenue per available room regardless of any mentions of economic slowdown.

With a series of changes already made to traditional buy-to-let investments (i.e. stamp duty surcharge) and more to come (i.e. changes to tax relief), savvy investors might start shifting their focus slightly.

Hotel investments are a niche in the investment market, one that might well be worth a consideration.

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But what about long-term goals? Will the hotel trend only last while the pound is weak and soon all these hotel rooms won’t be needed anymore and the seemingly hassle-free, hands-off investment turns into a well-hyped, but little thought-through flop?

First of all, PwC’s hotel forecast for 2016 expects continuing growth from the sector. The forecast especially highlights regional hotel investments as a good bet.

Following on from 10.4% revenue per available room (RevPAR) growth in 2014 PwC expected a growth of 6.3% for 2015 and a further 4.2% in 2016. The slowdown in growth is not surprising, given the over 36 months of occupancy growth in the UK provinces since November 2012. PwC expected occupancy to hit 76.0% in 2015 and forecast 77.0% in 2016, which would be highest on record, driven partly by structural supply shifts towards a greater proportion of budget rooms.

Secondly, developers like Shepherd Cox, who mainly focus on regional hotels and rebrand them after purchase into luxury accommodation, offer investment with a low level of risk. With buyback options, monthly paid income and a globally recognised brand, investors might feel as safe as they can when weighing up options.

Whether or not to invest in hotel rooms is still a decision every buyer needs to make for themselves, but when it comes down to the numbers, hotels might currently give investors all they’re looking for.

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