UK Hotel Investment, Spring 2012

Report Authors: Savills Research, UK Hotels & Healthcare

Report Summary:

2011 was a year of two markets

■ Investment volumes held in 2011 being only 0.8% up on the previous year to £1.5bn. While this did not mark a resurgence in investor activity it did buck the wider investment trend as total investment volumes in the UK saw a 7.1% fall over the same period.

■ Investors have continued their focus on prime. As a result there remained a geographical focus on the South East with it accounting for 68% (c.£1bn) of total volumes in 2011, 80% of this in London alone.

■ This focus was not just restricted to certain geographies it is also restricted to lease operated assets. Regional hotels operating under management contracts are still too far up the risk curve for those investors that have reentered the market.

■ 2011 also saw little change in the profile of investors. UK Institutions and to a lessor extent overseas investors were the only net investors in the sector. While overseas investors reduced their investment in the sector by 39%, UK Institutions increased it by 12%

■ Prime yields are expected to hold at current levels through 2012. However, the continued focus on leased assets means that downward pricing on those assets available on management contracts and/or vacant possession, particularly those in the regions, is likely to continue.

■ Our forecasts for capital value growth are that London values will increase by 3.9% this year with the regions seeing a further 3.3% fall. However, we may see declines in some regional markets in excess of this.

About the Author:

The Savills Research team has gained a reputation for an innovative and proactive approach, which comes from a clear philosophy of market dynamics and an understanding of our clients needs.

The team is unique in providing advice and analysis to clients across all sectors of the property market: from rural property to offices; residential to retail and leisure; in both the UK and globally.

Our established research team, with some 20 years experience, has a strong reputation for producing accurate, well informed and above all else, independent analysis and commentary.