Savills Reports Surge in UK Hotel Sales

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Hotel sales volumes in the U.K. reached £2.4 billion during the first nine months, almost 2.5 times the amount recorded for the same period last year, as investors showed renewed confidence in the market. 

The bulk of the large portfolio deals were witnessed during the first quarter, before transactions tapered off in the second quarter, according to Savills. The market is now encountering more realistic market pricing, pushing investors off the sidelines to close hotel purchase deals quicker, the firm reports. 

With £1.5 billion of hotels on the market, Savills expects sales to reach close to £3 billion by year end - the highest level since 2007.

The realistic pricing also reduced the time properties spent on the market. Six key hotel transactions spent an average of four months on the market in 2013, compared to an average of 14 months in 2012, the firm said. 

The positive performance falls in line with previous analyst forecasts. Last January, STR Global predicted positive supply and demand growth for London and the overall U.K. region's hotel market.

"Realistic" pricing is helping to spur investor interest as the hotel market performance in the U.K. picks up, Savills said. Year-to-date the gross operating profit per available room increased 4.8 percent compared to last year, driven by improvements in occupancy and rates. 

The firm reports an increase in the number of U.S. investors either creating or expanding their U.K. platforms. Portfolio deals include the purchase of Kew Green Hotels by Goldman Sachs and TPG; the purchase of the Principal Hayley portfolio by Starwood Capital; and the Hotel du Vin and Malmaison portfolio by KSL.  

Savills expects tourism to the U.K. from emerging economies will continue to expand, as the region could benefit from a new U.K. visitor visa program.  The firm expects the increased hotel performance will translate to growth in hotel sales volumes.

"Looking to 2014 we expect sales volumes to be boosted by more bank-led portfolios, however, without the flurry we saw in Q1 this year," Savills reports. "As a result we expect it to be more in line with the long term average of £2.5 billion."