Investors committed £3bn of investment into UK hotels in the first half of 2024, taking the total investment so far this year to 50 per cent above 2023 levels, Knight Frank data has revealed.
Major deals by Blackstone, Landsec and Starwood Capital contributed to the total.
The stark increase suggests a major recovery is afoot in a sector where investment volumes had dropped to their lowest levels in a decade.
In an industry that tends to be highly leveraged and involves vast sums of capital, last year, just £2bn of deals were signed, as buyers looked to wait until rates came down in an industry driven by highly leveraged deals.
However, Knight Frank’s analysis showed that a recovery is now fully underway as pent-up demand from big investors has begun to translate into major transactions.
The largest individual deal of the year was signed last week when private equity giant Blackstone snapped up the hotel operator Village Hotels from KSL Capital Partners in a deal worth around £850m.
Meanwhile, earlier in the year, Miami-based Starwood Capital snapped up ten Radisson Blu hotels in the UK from Edwardian Hotels for £800m. In May, Landsec offloaded its entire hotel portfolio to Ares Management in a deal worth £400m.
The sector’s recovery has pushed activity in the sector to just 10 per cent below pre-pandemic levels, even though the Bank of England’s base rate is 4.5 per cent higher now than it was then.
Henry Jackson, Partner and Head of Hotel Agency at Knight Frank commented: “The direction of travel for the sector is positive and the volume of portfolio transactions is evidence that the sector remains attractive.
“With a strong pipeline of hotels currently in legals, [we] expect this momentum to continue, and an interest rate cut will serve to further enhance the current optimism for investment in the UK hotel market.”
London has been the epicentre of transactions so a far this year, with 70 per cent of investment focussed on the capital, with volumes being driven largely by overseas investors, many from the US, who accounted for nearly half of the £3bn total.