Total deal volume in the UK hotels market could reach £8.5bn by year end, according to Savills.
The figure marks a 39% increase on 2014’s post-recession peak volume of £6.1bn and marginally exceeds the record total of £8.3bn in 2006.
The firm reports that £5.7bn of UK hotels has changed hands so far in 2015, with the H1 total of £3.5bn 76.8% higher than the total for the same period last year.
High-profile portfolio sales such as the LRG2 portfolio of Holiday Inn hotels, which changed hands for £225m, have contributed to the growth. Savills expects a further £1.6bn of portfolio sales to complete in the final quarter or early part of 2016, including the £1bn final tranche of the LRG portfolio of IHG branded hotels.
This increase in activity is exerting downward pressure on yields. The greatest compression has been seen in the franchised hotel sector, where yields now range from 5.5%-8.5% compared with 6.5%-10% in 2014.
Regional transactions have accounted for more than 78% of total transactions. US private equity houses have been behind 65% of hotel acquisitions in the regions, spending around £2.1bn. Key deals include Lone Star’s acquisition of the Jury’s Inn portfolio for £676m.
Rob Stapleton, hotels investment director at Savills, said: “The UK hotel investment market is on course for a record year as the appetite among overseas and domestic buyers in both London and the regions shows no sign of waning.”
