• Transaction volumes in year-to-date Q3 2024 reached £4.7 billion, an 181% increase on the same period in 2023
  • Deals in Q3 were largely driven by single-asset transactions in London, Edinburgh and the UK regions
  • London accounts for 51% of major deals in Q3
  • Investor confidence remains high, with projections of continued demand growth and deal activity

Transaction volumes in the UK hotel real estate market reached c. £732 million in Q3 2024 as investment momentum continued albeit at a slower pace relative to the first and second quarters of the year, according to Cushman & Wakefield.

The third-quarter volume represented a 93% increase on the same period in 2023, fuelled primarily by single-asset transactions in London, which accounted for 51% of the total, as well as Edinburgh, and smaller sales across the UK regions. This contrasts to the large-scale portfolio deals which accounted for two-thirds of the deal volume during the first half of2024.

On a cumulative basis, year-to-date investment volumes reached £4.7 billion to the end of Q3 2024 – 181% higher than the same period in 2023. A total of 30 properties representing more than 3,900 rooms transacted in Q3 2024, bringing the year-to-date total to 230 properties (representing c. 25,500 rooms) to have changed hands in 2024.

Notable deals include the c. £230 million portfolio acquisition of three London aparthotels – branded Residence Inn by Marriott – and, in a separate transaction, the DoubleTree by Hilton Edinburgh City Centre. In both transactions Pandox was the buyer and the seller was Starwood Capital. Also in Edinburgh was the purchase of Yotel Edinburgh by private equity firm Millemont Capital Partners, also from a Starwood Capital affiliate, Brightbay Real Estate Partners (BBREP).

This transactional activity has been underscored by continued confidence among hotel operators and investors in top-line growth with forecasts from STR / CoStar projecting RevPAR growth of 4.5% in London and 5.1% UK-wide for the next 12 months.

Regional UK hotels have outperformed London, achieving higher RevPAR growth in year-to-date 2024. According to STR / CoStar, RevPAR in the UK regions sits 31% above 2019 levels in the 12 months trailing August 2024, versus 24% in London for the same period. Translating top-line growth into profitability remains a challenge, with many looking to the Chancellor of the Exchequer’s upcoming Budget for support with business rates and clarity on employee wage growth.

Yields have remained generally stable in 2024, with slight compression observed in top-tier deals within high-barrier markets. With greater political certainty in the UK, increasing liquidity in debt markets, and anticipated interest rate cuts in Q4, Cushman & Wakefield expects a gradual tightening of prime yields heading into 2025.

While luxury hotels continue to experience strong demand, value-conscious consumers are exerting pressure on rates outside of peak periods. Group and corporate segments have demonstrated the most significant year-on-year (YoY) improvements, driving mid-week demand and benefiting regional markets. According to forecasts from Oxford Economics, by the end of 2024, international and domestic nights in hotels are projected to grow by nearly 9.5% and 4.0% YoY, respectively, reflecting an annual growth rate of 2.2% over the next five years.

Looking forward, the outlook for the rest of the year remains strong, with full year 2024 deal volumes anticipated to exceed £5 billion. This momentum is expected to continue into 2025, supported by an expectation of more quality stock on the market, declining interest rates as a catalyst and improving clarity in pricing.

Although on face value the total deal volume for this year has been significantly elevated, when we strip out the larger portfolio trades activity has been more nuanced, reflecting the ongoing bid:ask spread and lack of quality single asset stock. With the summer now over and 2025 firmly in sight, the approach of both owners and buyers is certainly shifting.
We’re now experiencing a greater bullishness to get deals done, fuelled by a greater meeting of minds between buyers and sellers on pricing, the ability to price in base rate compression, and the general resilience of hotel performance. Challenges of course remain, with many looking to the Autumn Budget for clarity on the path ahead, but on the whole the ‘wait and see’ sentiment is easing as positive conviction takes centre stage. Jack Wallsworth, from Cushman & Wakefield's Hospitality Capital Markets team

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more.

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