Investment into UK hotels has reached £3.22bn in the first three quarters of the year according to new research from Savills. Despite volumes being down c.44% on the same period last year, the numbers are up 11.3% against the 10 year average of £2.89 billion.
This year has seen 97 deals take place according to the firm, a decrease of 49% from the 190 that took place in the same period in 2018. Despite this lack of deal count, there’s been continued interest in the sector from both domestic and overseas investors which accounted for £1.35bn and £1.87bn respectively.
Overseas investment has accounted for £1.87bn of investment so far this year, exceeding the 10 year average of £1.4bn by 38%. While some international buyers have reduced activity levels this year, there is still significant interest and purchasing activity by buyers from Asia Pacific.
Asia-Pacific buyers have been the most active overseas investors to date in 2019 spending a total of £1.08 billion, representing 56.9% of total overseas activity. This is a tenfold increase compared to the volumes recorded over the same period in 2018 (£93m).
The volumes are at their highest for the first three quarters of the year since 2015 when transaction volumes reached £1.13bn. Hong Kong investors have been the most prolific spending a total of £947m to date this year (87.7% of total Asia Pacific volumes) making it the highest year on record in terms of hotel investment from Hong Kong buyers.
In terms of where capital is being spent, London attracted the most investment into the UK with £1.98bn spent in the capital. The north followed with £465 million, the south east at £430m, Scotland at £225m, the south west at £110 million. There’s been an even split between portfolio and single asset transactions, with portfolios attracting £1.7bn (53% of the total) and individuals £1.5bn (47%).
Rob Stapleton, director in the hotels team at Savills, commented, “Deal volume this year has undoubtedly been affected by global political uncertainty and wider global macro issues. The UK’s hotels are seen as a relative safe haven for overseas investors, illustrated by the rise in capital from Asia Pacific. We have seen a flight to quality with investors favouring London assets in particular.
“This trend is expected to continue and whilst the UK's regional markets have seen lower transaction volumes so far this year, we expect the ripple-effect of historically low yields in London to encourage investors into the more stable regional markets in the search for yield.
'Volatility in the equity markets and the spread between gilts and equivalent hotel yields remain attractive however, and we expect investment into real estate, and in hotels in particular, to remain an attractive option for investors from across the globe.'