Hotel Market Beat H1 2024 - UK
UK Hotel Investment in H1 Up 210% From H1 2023 to Nearly £4BN
- Transaction volumes in the first half of 2024 reached £3.9 billion, a 210% increase from H1 2023, reaching highest H1 levels since 2015
- Large-scale portfolio acquisitions accounted for nearly two-thirds of total investment
- London accounts for 55% of major deals
- Investor confidence remains high, with projections of continued demand growth and deal activity
Transaction volumes in the UK hotel real estate market have significantly increased in the first half of 2024, reaching levels unseen since H1 2015. According to new data from Cushman & Wakefield, this revival saw around £3.9 billion transacted by hotel investors in the first half of the year. Fuelled by several major private equity portfolio deals, half-yearly investment saw a 210% upswing in activity versus the same period in 2023.
UK hotel investment volumes in H1 2024 have proven the sector to be a leading asset class, surpassing office, retail, industrial, residential and PBSA deal volumes. Investment in the first half of this year soared, increasing by £2.6bn versus H1 2023, 132% against H1 2022 and 37% versus H1 2019. With further deals activity expected in the second half of the year, full-year volumes are expected to surpass £5 billion.
The H1 2024 volume covered almost 200 properties across the UK, representing c. 21,400 rooms. The investment appetite in the hotel sector remains robust, signalling a reinvigorated UK hotel investment market after a period of relatively sluggish activity.
It is noteworthy that portfolio deals were a major catalyst, making up almost two-thirds of the total investment. Significant portfolio sales included the Radisson Edwardian Portfolio (10 hotels), Project Cobalt (LXi REIT Travelodge Portfolio, 66 hotels), Project Leopard (Landsec Accor Portfolio, 21 hotels), and the Village Hotels Portfolio (33 hotels).
London accounted for 55% of major deals by volume. However, outside London, volumes reached approximately £1.8 billion, again driven largely by portfolio trades involving regional UK assets.
The key driver of investment volumes were major portfolio deals, largely driven by a combination of exits of major owners of larger platforms for strategic reasons that meet the market of opportunistic funds seeking large-scale acquisitions. In contrast, the single asset or core-plus market has seen sellers holding out for higher prices.
American and European investors contributed over 70% of the total volume. Further deployment of international capital is also anticipated in H2 2024 due to relatively greater political and economic clarity with the conclusion of the General Elections.
Yields generally remained stable in the first half of 2024, with slight compression for top-tier deals in high-barrier-to-entry markets. Upscale and upper upscale hotels continue to attract the most investment, reflecting a focus on high-quality assets.
However, the transaction market is still characterised by ongoing polarisation. Large strategic deals and smaller private deals continue with liquidity available. However, mid-market deals are still being hampered by significant gaps between what buyers are willing to pay and what sellers are asking for.
Hotel operators and investors maintain strong confidence in top-line growth in the next year, with forecasts for the next 12-months projecting RevPAR growth of 3.8% in London. Cost pressures remain with living wage increases in April 2024, although this is partly offset by utilities costs continuing to ease. Edinburgh has been a stand-out market with trailing 12-months to June 2024 GOP per available room around 30% higher than in 2019.
Looking ahead, the market points towards a sustained positive sentiment for the sector bolstered by improved national business and consumer confidence indexes up 45 points and 32 points respectively since the end of 2022.
International arrival numbers to the UK have strong prospects with total figures projected to grow by almost 50% over a 10-year horizon, with nights in hotels forecasted to grow nearly 7% year-on-year by the end of 2024. Notably, arrivals from China are expected to grow by 380% over this period. Furthermore, UK-wide occupancy nudged up to 77.4% in the 12-months trailing June 2024 supported by easing cost of living concerns, an increase in leisure travel, steady recovery of corporates and rebounding cross-continental travel.
The second half of 2024 is expected to maintain strong activity, with further hotel portfolios appearing to test the market. Although single-asset transactions have remained fairly subdued in the first half of 2024, Cushman & Wakefield expects further deal flow to be driven in part by refinancing pressures, inward movement in interest rates, and greater pricing clarity bringing buyers and sellers closer, especially as 2025 moves closer.
Hospitality continues to prove itself a robust performer, with strong topline growth and easing cost pressures, and this in turn continues to attract investor interest. The sector is on track to record very healthy transaction volumes in 2024, driven by a handful of key portfolio deals which have been hard to come by in recent years. There is a great depth of capital waiting to get into the hospitality sector which Cushman & Wakefield expects to sustain deal momentum throughout the year and into 2025 as more product which meets the criteria of that capital comes to market.Ed Fitch, Head of Hospitality UK & Ireland at Cushman & Wakefield
