Deal volumes in the UK hotel sector have fallen by around 44% on the same period last year, according to new findings from Savills.
Investment in UK hotels reached £3.2bn in the first three quarters of the year. Despite the year-on-year decline, Savills said it marked an 11.3% rise against the 10-year average of £2.9bn.
So far this year, 97 deals have taken place, dropping by 49% from the 190 that took place in the same period in 2018.
Domestic investors accounted for £1.4bn of the investment, while £1.9bn of it was overseas capital. The latter was boosted in particular by buyers from Asia-Pacific, alongside reduced activity from other international buyers.
Capital from the Asia-Pacific markets alone totalled £1.1bn, representing 56.9% of total overseas activity.
Savills said this was a near-twelvefold increase on volumes recorded over the same period in 2018 (£93m). The volumes are at their highest for the first three quarters of the year since 2015, when transaction volumes reached £1.1bn.
Hong Kong investors have been the most prolific, spending a total of £947m to date this year (87.7% of total Asia-Pacific volumes) making it the highest year on record in terms of hotel investment from buyers in the region.
London attracted the most investment into the UK, with £2bn spent in the capital. This was followed by the North (£465m), the South East (£430m), Scotland (£225m) and the South West (£110m).
There was an even split between portfolio and single-asset deals, with portfolios attracting £1.7bn (53% of the total) and individual hotels £1.5bn (47%).
Rob Stapleton, director in the hotels team at Savills, said: “Deal volume this year has undoubtedly been affected by global political uncertainty and wider global macro issues.
“The UK’s hotels are seen as a relative safe haven for overseas investors, illustrated by the rise in capital from Asia-Pacific. We have seen a flight to quality, with investors favouring London assets in particular.”
He added: “This trend is expected to continue, and while the UK’s regional markets have seen lower transaction volumes so far this year, we expect the ripple effect of historically low yields in London to encourage investors into the more stable regional markets in the search for yield.
“Volatility in the equity markets and the spread between gilts and equivalent hotel yields remain attractive, however, and we expect investment in real estate, and in hotels in particular, to remain an attractive option for investors from across the globe.”
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