UK hotel investment activity stalled in 2022 with the annual volume of deals below the five-year average, according to the latest data from Knight Frank.
In the first half of 2022 deals worth £2.1bn concluded, but activity slowed in the second half of the year, with the annual total hitting £3bn, due to market volatility caused by the war in Ukraine, domestic political turmoil and growing global economic uncertainty.
Although the volume of deals may have been sluggish many hotel operators enjoyed a strong trading performance last year and despite the anticipation of some distressed sales in 2023 Knight Frank said the sector is in a ‘strong position to navigate the current headwinds and macroeconomic uncertainty’.
The company added there would be ‘subdued’ levels of stock this year, which will increase competition for assets, and it anticipates a revival in the number of hotel portfolios being marketed.
Henry Jackson, partner and head of hotel agency at Knight Frank, said: “Whilst no hotel business is immune to the effects of an economic downturn, and whilst profit margins are likely to be squeezed in the short-term, operationally the sector has continued its recovery and an upturn in investment levels for 2023 is anticipated.
“We have seen an uptick in investor activity at the end of 2022 and purchasers who are proactively seeking out opportunities now are well placed to move quickly when new stock becomes available. Investors are showing renewed signs of confidence in the London hotel market, with overseas purchasers benefitting from currency plays.
“Once the economic picture is clearer and the availability of debt recalibrates, we expect transactional activity during 2023 to rebound at a more buoyant pace, exceeding 2022 levels. With hotel property offering value and resilience relative to other real estate asset classes, a wide range of investor types will seek to deploy capital into the sector.”
