The UK hotel market finished 2017 with gains of 32% on the previous year, hitting a total £5.4bn worth of investments from both the UK and overseas.
Hotel investment has seen a surge in popularity, according to a recent report by estate agency Savills, with last year’s total investments surpassing the 10-year average of £3.6bn by 51%.
Individual investments – as opposed to institutional – increased in the year, making up 60% of the total value, which amounted to £3.2bn. Savills suggested this could be down to the breaking up of larger portfolios that were purchased in 2014 and 2015.
Martin Rogers, head of UK hotel transactions at Savills, said: “Last year was a fantastic one for the UK hotels market as appetite for assets came from both domestic and overseas sources. The popularity of the UK has been boosted in 2017 by the rise of the staycation and the stability following the EU referendum in 2016.
“We expect this popularity to continue as hotels move further into the mainstream.”
While London accounted for 42% (£2.3bn) of last year’s total, the rest of the investments were made elsewhere in the UK, demonstrating the shift away from the capital’s domination of the market.
Get a room…
While the concept of hotel room ownership isn’t new, it’s a market that has seen many changes since it was first popularised in the post-war era, when wealthy businessmen would buy timeshares in hotels to ensure they were available for them when going on holiday – as well as to make money from the rest of the time.
Nowadays, with the relatively low point of entry available, the hotel investment market is much more open to a wider range of investors with varying amounts of money to spend.
Some investors see hotels as a more stable alternative to the traditional buy-to-let route, as it offers high yields without the same level of market fluctuation that can be seen in the property market. Demand for hotels can be seasonal, but is always high if the right location and hotel is chosen, such as in a city or near an airport or major interchange.
Another benefit is the relatively hassle-free nature of owning a hotel room. While buy-to-let landlords often need to manage the property, or at least assign a management company for a hefty fee, the hotel itself will deal with matters like occupancy and tenants for you – as well as cleaning, providing meals, advertising, marketing and taking bookings. The hotel will normally take a cut of your profits, but you are still left with the higher yields.
