7/22/2021 | Hotels

Hotel market remains active with minimum pricing adjustments

Specialist business property adviser, Christie & Co, has today launched its mid-year review of the UK hotel market, reflecting on activity, trends and challenges in the first half of 2021. The review also shares the results of Christie & Co’s latest operator sentiment survey, providing an outlook for the sector and business operations in the second half of 2021.

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The review reveals that despite fronting further disruptions to trading at the beginning on the year, the hotel sector has experienced continued transactional activity across all regions of the UK, highlighting its resilience in the face of adversity. The combination of strong demand from investors, need to deploy capital and limited stock is maintaining pricing, with minimum adjustments compared to pre-Covid levels.

Several large transactions which attracted strong interest took place across the market, despite hotels remaining shut, suggesting investors are keeping a positive, long-term view towards opportunities. Christie & Co brokered London’s first transaction of the year, with the sale of the Holiday Inn Express Ealing, a three-star hotel located in the West London borough of Ealing to growing hospitality group, Lefar Group Limited.

The review goes on to highlight that since the lifting of restrictions on domestic leisure travel commenced on 17 May, 97% of the UK’s hotel rooms have reopened for business, with regional markets leading the way. Occupancy levels have also been on an upward trend and rates are benefiting from this surge in demand, particularly in prime regional destinations due to the booming staycation market.

Headwinds identified in the review include the huge amount of capital still waiting to be invested, yet the market is lacking quality, large-scale assets for investors to look at. Across the board, stock levels continue to be a concern, with sellers holding off for several reasons. In addition, the market is still yet to experience the level of distressed activity that we predicted in January from Q2 onwards, due to the ongoing government financial stimulus on offer for businesses and the recent extension to the rent moratorium until March 2022.

Christie & Co also surveyed a pool of hotel operators to gain an understanding of sentiment within the market, and the outlook for business operations in the second half of 2021. Compared to the last survey in January, the results suggest operators are keeping a positive outlook for the second half of the year, with over 50% of respondents saying they are positive about recovery over the coming months. This is likely due to the surge in domestic bookings and anticipated bounce-back for the summer months. As a result, over 50% of respondents feel hotel values will increase in 2021, which will hopefully give more operators the confidence to sell in the second half of 2021.

Encouragingly, two thirds of respondents also feel it will take one to three years for the sector to return to pre-Covid levels. Key challenges identified by respondents as a threat to this recovery include the staffing crisis facing the hospitality industry, rising costs and a lack of overseas tourists.

Carine Bonnejean, Managing Director of Hotels comments, “Despite the challenges of the past 15 months, cautious optimism is finally here, with most hotels now reopening ahead of a bumper summer season for many to enjoy. Staffing is by far the number one challenge for hotels trying to make the most of the pent-up demand. On the transactional front, we are seeing unprecedented investor appetite at all levels supporting hotel values but we are unlikely to see a massive shift in stock levels until the later part of the 2021, once summer trade benefited cash flows and government support measures are phased out.”
 
To read the full ‘Hotel Mid-Year Review’, CLICK HERE.
 

For further information on this press release and interview requests, contact:
Bronte Hughes, Corporate Communications Executive
P: +44 (0) 7721 420 656 or E: bronte.hughes@christie.com