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18 Janvier 2012
Réf: PR15832
Cash buyers and international investors could ‘fill their boots’ in the hotel sector
The lack of debt finance and the ongoing economic uncertainty combined to repress a hotel sector which began 2011 with high hopes following a hint of recovery in 2010, according to Christie + Co’s Business Outlook 2012 publication.
According to Business Outlook 2012, which uses average price information derived from hotel transactions brokered by the company, average prices showed a decline of 5.1 per cent in 2011, compared to a small increase of 0.9 per cent the previous year.
Jeremy Hill, Director & Head of Hotels at Christie + Co, says: “In many respects, 2011 can be considered a tale of four quarters. The year began with operators and investors alike full of optimism, following a relatively positive end to 2010 – and the trading environment remained largely benign. It moved to a second quarter typified by increasing deal activity, albeit partly due to distressed assets, like von Essen Hotels, coming to market.”
As the reality of the slow pace of recovery hit home, quarter three was marked by uncertainty and confusion and by the fourth quarter transactional activity stuttered as operators and investors adopted a ‘wait and see’ approach.
Trading performance was inextricably linked to the economy where, as far as the UK was concerned, it remained very much a case of ‘London and the rest’, although during the year even the capital had its share of peaks and troughs in revenue per available room (RevPAR). Higher quality hotels in both London and the regions also suffered as consumers migrated to mid-market accommodation, and mid-market operators ‘up-scaled’ their customer base.
Hill adds that deal activity in 2011 was typified by a ‘flight to quality’ by investors — highlighted by the huge interest in the sale of von Essen Hotels by Christie + Co on behalf of the administrators.
He says: “The investor interest in the sale of the von Essen Hotels portfolio, plus the sales of Mint Hotels and London’s W Hotel, emphasised both the investor desire for quality and that values for quality assets were holding up even in the most difficult market conditions.”
Elsewhere in the UK, transactional activity largely stalled due to the lack of available debt facilities and the over-pricing of assets by some owners/operators. As the year progressed, cash became king in a market of limited supply with new hotel pipelines becoming smaller, and those developments that did enter the fray serving to disrupt an already fragile sector — depressing values on existing assets as a consequence.
According to Jeremy Hill, however, the smaller pipelines could have a positive effect in the longer term.
Hill says: “Dwindling pipelines could lead to operators reaping rewards from a decline in competition. With the exception of London, which is always likely to see development, hotel operators could see a marginal increase in values and improvement in trading performance while the pipeline continues to be slow. Needless to say, quality will remain key, so capital expenditure is essential.”
If in 2011, cash was king, Hill says we can expect more of this in 2012, plus an influx of investment from emerging nations.
Hill adds: “The next year will see cash buyers dominate once more, and there will be a real opportunity for them to ‘fill their boots’, should distress force more property to the market. Investment in the sector is likely to come from an even more diverse international community, including from the likes of Russia, India and China, but this is likely to be very London-centric investment.”
Looking ahead to a year bringing the Olympics, the Farnborough International Airshow and the Queen’s Diamond Jubilee, Hill says that any short term boost is likely to be offset later in the year. And as far as transactional activity is concerned, price will be key.
He says: “With the concentration of visitors in the summer months there is certain to be a drop off in demand and visitor numbers may fall sharply from an extraordinary peak.
“Concerns remain over funding, so accurate and considered pricing of assets is the key to success — every deal this year will be about price. This may create a fragile market as the timid hang onto assets awaiting a recovery that doesn’t look like coming for some time.”
Christie + Co’s predictions for the hotel sector in 2012:
• Cash buyers will hold the upper hand
• Investment will come from diverse and new markets including China, India and Russia, but will be London-centric
• Banks may seek to rationalise their investments and we may see some consolidation in the market
• Transactional market likely to remain cautious, prices will be driven by those able to buy now and fund later
• Regions will see continued variable trading performance, but may be boosted by Olympic ‘stay-aways’
• Mid-market and budget hotels will continue to up-scale their customer bases
• Capex timebomb will hit owners and force down prices on tired assets
Pour de plus amples informations sur les hôtels en vente via Christie + Co, cliquez sur www.christie.com/fr/search.
Pour plus d’informations veuillez contacter:
Jeremy Hill (Director and Head of Hotels)
London International (+44 (0) 20 7227 0700)
Jeremy.Hill@christie.com
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