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Weak pound encouraging foreign investors to check out UK hotel opportunities

By Chris Day, global MD Christie & Co

It has been more than a month since the EU referendum, and although many overseas investors intend to wait and see until better understanding of Britain s future after Brexit and further renegotiations are settled, many investors view this as a rare opportunity and seek any bargain given by a weakened British pound. Among these investors, Chinese and Hong Kong investors are relatively active and have completed many transactions, both property and corporate, across the UK and the expected inbound tourism boom due to a sharply dropped currency has encouraged players into the UK hotel market. Given the weakened currency rate and its reputation, it is clear that Asian investors continue to see UK as an attractive destination for the foreseeable future.

Even though investors are possibly becoming increasingly reluctant to invest in the London market as prices continue to rise, they have started considering sites in the UK regions instead. While London continues to remain an international hotspot for hotels, tier one UK regional cities such as Manchester, Liverpool and Birmingham are all increasing in demand, price and profitability, and we have also seen high level transactions taking place in more secondary locations, such as Stratford-upon-Avon, Cambridge and the Scottish Highlands. With the hotel market specifically, over the last two years, we have seen a shift in attitudes with more investors who had previously concentrated solely on residential and office opportunities now considering hotels.

With numerous factors contributing to the boost in the hospitality trade in secondary UK cities, this is a prime focus for those seeking guidance on the best opportunities.

Chris Day is a member of the International Society of Hospitality Consultants who offer global hospitality expertise and counsel.1

Weak Pound Encouraging Foreign Investors To Check Out UK Hotel Opportunities

Martin Fullard

References

  1. ^ International Society of Hospitality Consultants (www.ishc.com)

Weak pound encouraging foreign investors to check out UK hotel …

By Chris Day, global MD Christie & Co

It has been more than a month since the EU referendum, and although many overseas investors intend to wait and see until better understanding of Britain s future after Brexit and further renegotiations are settled, many investors view this as a rare opportunity and seek any bargain given by a weakened British pound. Among these investors, Chinese and Hong Kong investors are relatively active and have completed many transactions, both property and corporate, across the UK and the expected inbound tourism boom due to a sharply dropped currency has encouraged players into the UK hotel market. Given the weakened currency rate and its reputation, it is clear that Asian investors continue to see UK as an attractive destination for the foreseeable future.

Even though investors are possibly becoming increasingly reluctant to invest in the London market as prices continue to rise, they have started considering sites in the UK regions instead. While London continues to remain an international hotspot for hotels, tier one UK regional cities such as Manchester, Liverpool and Birmingham are all increasing in demand, price and profitability, and we have also seen high level transactions taking place in more secondary locations, such as Stratford-upon-Avon, Cambridge and the Scottish Highlands. With the hotel market specifically, over the last two years, we have seen a shift in attitudes with more investors who had previously concentrated solely on residential and office opportunities now considering hotels.

With numerous factors contributing to the boost in the hospitality trade in secondary UK cities, this is a prime focus for those seeking guidance on the best opportunities.

Chris Day is a member of the International Society of Hospitality Consultants who offer global hospitality expertise and counsel.1

Weak Pound Encouraging Foreign Investors To Check Out UK Hotel ...

Martin Fullard

References

  1. ^ International Society of Hospitality Consultants (www.ishc.com)

UK hotels show mixed results in Q2 with subdued trading forecast says Hotel Bulletin

LONDON – Hotel occupancy in London showed its sixth consecutive quarter of year-on-year decline with Brexit poised to subdue the sector further, according to the latest Hotel Bulletin: Q2 2016, published this week by HVS, AlixPartners and AM:PM. Hotel occupancy in the capital, in common with other major European cities, continues to be affected by increased global terrorist activity. London has also seen a decline in the number of US tourists travelling because of the presidential election. The impact has been a 2% decline in London?s RevPAR compared with Q2 2015 and average room rates failing to increase for the second consecutive quarter.

Whilst this is significant in the short term, London is, and will remain, a huge magnet for inbound tourism so the longer term future of the capital?s hotel sector is still positive, even when taking account the new hotels in the pipeline and the potential impact of the Brexit implementation causing economic wobbles,” commented HVS chairman Russell Kett. Across the UK the picture was more varied, although with overall demand sluggish average RevPAR growth only reached 2%.

This is seen as further evidence we may be approaching the top of the property cycle in some locations. Performance of hotels across the 12 UK cities reviewed varied significantly in Q2. Birmingham was top with RevPAR growth of 16%, while hotels in the Roman city of Bath saw RevPAR up 11% year-on-year on the back of a boost in international tourists. In contrast Newcastle recorded another quarter of RevPAR decline, down 4%, as the combined effects of a 10% increase in hotel supply over the past 12 months and strong comparators last year came into play. Aberdeen saw RevPAR decline 24% year-on-year as hotel occupancy continues to suffer from the city’s exposure to the oil and gas industry.

If predictions that oil prices will continue to fall are correct, this will further suppress demand for the city’s hotels.

Performance has always been very location-driven,” commented Kett, “with localised supply and demand issues having an impact on hotels’ operating performance. UK-wide averages tend to hide these fluctuations and even the performance within an individual city can vary quite markedly from hotel to hotel,” he added. Apart from the 575m acquisition of Atlas Hotels by London & Regional, mergers and acquisitions in the sector have also been subdued throughout 2016 due to uncertainties surrounding Brexit, weaker economic growth in China, terrorism in France, Belgium and Turkey, and the US presidential elections. Now the outcome of the referendum is known and Britain gears up to leave Europe, there is cautious optimism that the hotel sector will remain an attractive source of investment for global investors interested in the medium-to long-term growth perspective. However, this is reliant on the UK remaining an investor-friendly market post-Brexit.

The Brexit decision is having the double-impact of weaker sterling and a reduction in anticipated economic growth.

This is both good, and bad, news for the sector in that Britain becomes a cheaper destination for overseas visitors, dampening outgoing UK travel but potentially increasing the F&B costs as some suppliers pass on price rises. Hotel transaction activity is also likely to slow down as investors assess the outlook of future trading but in the longer term we are optimistic the UK will remain an attractive source of investment for global investors,” Kett concluded. Download the Hotel Bulletin: Q2 2016 by clicking here1.

References

  1. ^ here (www.hvs.com)

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