The perfect environment for hotel room investment
In our property investment blog in which we discussed what makes investing in hotel rooms so appealing, we highlighted factors that included:
- Ease of understanding as an investment
- High yields from a hassle-free property investment
- Flexibility for long-term financial planning
We also discussed the rapid growth of the industry. Investment news has recently highlighted how the big boys are preparing for an unprecedented increase in tourism and domestic travel. The post-Brexit fall in the pound has made travelling to the UK especially attractive. For UK holidaymakers, staying at home has suddenly become a cheap option.
With occupancy rates rising and yields per room in regional hotels outstripping the performance of London’s hotels (see the Hotel Britain Report by BDO), one of the best sectors to make a property investment is hotel rooms. The following recent investment news confirms this.
Big money hotel property investment is well above average
Property investment companies and hotel management firms are making big investments in UK hotels. In the first nine months of this year, a report by Savills has found that UK hotel transactions totalled more than £3 billion. That’s 12% above the ten-year average.
In a period that was punctuated by the EU Referendum, you might have thought UK hotel room investment would have fallen. Instead, the number of deals completed by June (113) was unchanged from the same period in 2015. Just like the money invested, the number of hotel transactions is up on the average – by almost double. There have been some large investments, but even greater numbers of smaller investments. A sign that smaller regional hotels are in vogue, perhaps?
Interest in regional hotels rockets
London hotel property has been hard to source, and with economic growth picking up nicely in regional centres, the traditionally quiet month of August was anything but outside the capital. Last year August saw just five regional deals completed. This year, almost three times as many hotel transactions were finalised in the month. Of the 14 hotels changing hands in the regions, two of the largest were The Imperial Hotel in Torquay and the Kenwood Hall Hotel in Sheffield.
The weaker pound is good for domestic and overseas hotel property investment
For the first time since 2011, foreign investors were no longer dominant in the hotel market during the first half of the year. However, the weaker pound since the end of June is expected to prompt an increase in investment from overseas as well as encourage domestic investment companies to maintain their interest. The fourth quarter really could be explosive for the hotel investment market.
Hotel refurbishment spending through the roof
While hotel transactions are well above their average, renovation spending has taken off. In a market that is becoming increasingly competitive, hotel management companies are pulling out all the stops to keep ahead of their competition.
In 2015/16 spending on refurbishment projects broke the annual £1 billion mark for only the second time since 2011/12.shows that more than £1.6 billion was spent in the last 12 months on investments ranging from redecoration to investment in extra services. Such services include free Wi-Fi, spa treatments, and dining options.
Boutique hotels going upmarket
Independent and boutique hotels are at the forefront of investment. Many now have kitchens managed by known chefs, offer workshops and wine tastings, and digital detox weekends.
Regional hotels set to shine even brighter
Research by JLL forecasts that UK regional hotels are in for a bright future. Regional centres are attracting increasing numbers of business and leisure visitors. Occupancy rates in Birmingham, Leeds and Edinburgh, are all growing. Again, the weakness of the British pound is a major factor.
Almost 5,000 hotel rooms are set to open in the major cities of Birmingham, Manchester, Leeds and Edinburgh within the next 24 months. That could fuel further growth, and with companies moving their headquarters out of London and into the regional cities, the hospitality industry is on course for rapid growth supported by the needs of UK businesses as well as foreign and domestic tourists.
Our take on hotel investments
For many, Brexit has created an uncertain future for many, but also one full of promise. The fall in the value of the pound has created what might be a once-in-a-lifetime opportunity for property investors.
Investment into hotel rooms could take advantage of a sector that looks set to ride the wave of inward and domestic investment and growth for years to come.
Our introductory hotel room investment education course and free Investments eBook focusses on hotel room investment shows you:
- Why, despite years of discounting hotel rooms, the author (Brett Alegre-Wood) has chosen to not only invest in hotels, but own them.
- An investment once reserved for the rich and powerful, hotel rooms are now available to all of us.
- How to mitigate the risks by using professional operators to run the hotel.
- How hotel rooms are the reverse of your buy-to-let residential portfolio.
- Predictions for the next 20 years in the hotel sector… and why it’s looking up.
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