The Hotel and Leisure Sector

The hotel and leisure market has seen a recent renaissance, with booming rates and high yields.

The full impact of the UK's decision to leave the European Union may not be known for some time. 

What we do know, however, is that economic growth is predicted to slow and the weak pound could provide a boost to the leisure industry through an influx of international visitors and 'staycations'.

The shrinking value of the pound represents ample opportunity for leisure companies across the UK according to Nick Varney, chair of the British Hospitality Association and chief executive of Merlin Entertainments.

“Holidays in Europe will be a little more expensive and encourage Brits to take more holidays in their home country”, he told the Financial Times.

Recent statistics from City AM show that the number of overseas visitors to the UK rose 7 percent in June to a record number of 3.5 million, compared to the same time in 2016.

These visitors spent approximately £2.2 billion on their visits to the UK, according to the Office for National Statistics (ONS).

Patricia Yates, director at Visit Britain said:

“Tourism is one of Britain’s most valuable export industries and this continued growth demonstrates the industry’s increasing importance as a key driver of economic growth across our nations and regions.

The tourism industry is making a compelling case to be one of the industries included in the government’s industrial strategy to ensure Britain continues to compete globally.”

What opportunities are there?

These properties span a vast array, from hotels to leisure facilities, pubs, restaurants, golf courses, sports complexes, gyms, spas, cinemas, theatres and museums. Holiday properties, such as caravan parks and lodges, also fall under this category.

Hotel and leisure investment opportunities are available all over the UK, from urban leisure schemes, bustling hotels in the capital city to rural spa resorts.

What should I be looking for?

When looking to buy hotels or any form of leisure property, there are certain factors to consider:

As with property investment, location is key. Areas close to tourist attractions, solid transport links and healthy customer traffic are what you should be looking for.

For hotels, amenities are important. Customers will flock to spots that feature swimming pools, spas and golf courses. Properties which have banquet halls can be used as wedding venues and bring in a new revenue stream.

Look for experienced management that will offer solid customer experience, great marketing capability and high-quality standards. This will encourage guests to re-visit and boost investment yields.

Check if the management firm has media presence through major travel booking search engines and social networking sites such as Facebook and Twitter.

How much will initial repairs cost before you re-open the site to the public?

Should I invest ?

Since 2010, tourism has been the fastest growing sector in the UK in terms of employment and Britain is forecast to have a tourism industry worth over £257 billion by 2025.

In 2013, tourism accounted for 9.6% of the jobs in the UK, generated £126.9 billion UK GDP.

Leisure and hotel sites tend to hold long leases, and the initial cash injection needed to redevelop the site is often low, as many of these properties will already come furnished.

The sector is, therefore, more suitable for those looking for a long-term investment. This kind of investment is considered as commercial and not residential, so the investment can be placed in a Self Invested Personal Pension (SIPP), a type of personal pension plan approved by HM Revenue and Customs, allowing tax-free growth and earnings.

Am I suited for the hotel and leisure sector?

As the actual leisure or hotel management firm is in charge of operating and marketing the services, this is perfect for those who would like less responsibility than buy-to-let investments, for example. Another issue to consider is that the market is consumer-centric, meaning that it is more prone to fluctuations aligned with wider economic activity than other commercial investments. It is therefore advisable to have a financial fall-back plan, just in case.  

Melanie Luff

About the author

Mel wrote for all titles in the Dynamis stable including, and as well as other global industry publications.


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