Latest commercial property news from Lambert Smith Hampton

South West Hotel Market Update 2016

24/02/2016

After a buoyant 2015, it's a positive outlook for the hotel market this year, reports Lambert Smith Hampton's hospitality and leisure director Phillip Gibson.

Last year was a bumper twelve months for the hotels market, with buyers and sellers taking advantage of strong trading and economic conditions. A range of portfolio and single asset sales were transacted with volumes at their highest level since their last peak.

Recent Activity

Portfolio sales made up the majority of the value transacted in 2015, with sales in the last half of the year including the Kew Green Hotels portfolio for £400 million and Jupiter Hotels for £160 million. The purchaser profile for those portfolios transacted came from a range of international investors with those from the Far East being particularly active in the second half of the year. 2015 also saw an increase in the number of single asset sales as owners and their funders took advantage of the market conditions.

A two-tier market does, however, continue and whilst we have witnessed increasing prices for good quality regional hotels, demand for non-prime hotels is more subdued and therefore we have not witnessed the same level of yield compression at this level of the market. 

It is not surprising that regional hotels made up the majority of those changing hands in 2015, given the portfolio sales that occurred.  The start of 2016 has seen a number of sales including three country house hotels and the Crowne Plaza Edinburgh forming part of the Prima Portfolio. 

The South West remains popular, and transactions such as Coombe Grove, Bath, together with the Chapter Hotels portfolio with assets in Exeter, Bristol and Cheltenham, illustrate the burgeoning interest in the region.  Whilst a number of higher value assets came to market in 2015, generally there remains a limited availability of stock which is helping to drive values. 

Outlook

With a large amount of portfolios sold, it is unlikely that the amount transacted in 2016 will reach the same levels as last year, although we anticipate there will be a greater number of single assets sales, particularly as owners work through portfolios.

The early signs for 2016 reveal that market activity remains positive with a number of hotels being brought to market.

Whilst we remain confident, there are a number of factors that may impact on sales this year, including a slowdown in global economic growth and a UK exit from the EU. Only time will tell how the year will unfold, although we anticipate another busy year ahead.

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