UK hotel transaction activity fell 60% year-on-year to £825m in the first half of 2023, according to the latest data from Savills.
The company said H1 this year saw a “continuation of the decreased transaction activity” witnessed in the hotel investment sector in H2 2022, which was largely driven by macro-economic uncertainty.
However, Savills believes investor momentum will increase in the second half of the year as the “bid-ask spread continues to tighten, which will drive annual transaction volumes closer to long-term averages”.
Rob Stapleton, head of UK hotel capital markets at Savills, said: “We have seen momentum building during the first half of the year, as operational performance has continued to improve. There is significant investor appetite and a willingness to do deals, both on the vendor and purchaser side, where the requirements and returns align. With the volume of transactions currently on the market and also being readied for sale, a narrowing bid-ask spread will facilitate greater volumes of transactions in the second half of the year.”
Tim Stoyle, head of UK hotels at Savills, added: “Following the pandemic, we’ve seen a real bounce-back in the sector, which arguably has the best growth story from across the real estate spectrum and has therefore caught the eye of investors. Although the current cost of debt continues to be a major topic, we expect to see an evolution in the profile of investors into the sector, particularly as expectations around yield softening materialise and the sector continues to deliver operationally.”
