Hotel transaction activity across the UK totalled £1bn in the first half of 2012, more than double that of the same period in 2011, according to analysis by Deloitte, the business advisory firm.
According to the study, the pick-up in deal activity, which started last year, was driven primarily by single-asset transactions, such as the InterContinental at Westminster.
Portfolio transactions made up 30% of total deal activity during H1, compared with 70% in 2011. The most significant transactions were the acquisition of the freehold interest in six Principal Hayley hotels by Principal Hayley Group, and their subsequent sale-and-leaseback to Pramerica.
The report found that single asset deals continued to be dominated by London where pricing remains strong. Outside of the capital, distressed sales dominated the market with notable transactions including the sale of two von Essen assets (Cliveden and the Royal Crescent in Bath) and the Crowne Plaza Cambridge. A combination of flat revPAR and uncertainty as to the profile of any recovery – notably profit - continues to hamper the transaction market.
Nick van Marken, global head – advisory, travel, hospitality & leisure at Deloitte, said: “Some recovery in the UK hotel transaction market was apparent in 2011, mainly in the second half of the year, and this has continued in 2012. Single asset transactions dominate and London remains the focus for most investors. The lack of readily accessible debt financing remains an on-going constraint and has made it difficult to close on large portfolio deals in particular.
“We may see more portfolio deals coming to market and certainly several possible transactions are being mooted. This said, difficulties in accessing debt funding and the continued disparity between buyer and seller in terms of price expectation mean disposal processes are likely to continue to be longer and more difficult to complete. The market will continue to favour cash buyers or those not totally reliant on bank financing to close a deal.”
