The UK hotel market defied expectations and saw investment volumes reach £6bn in 2019, attracting a significant 26% uplift in investment by institutional investors.
This is according to the latest UK Hotel Capital Markets: Investment Review 2020 report by global property adviser Knight Frank.
Following an ‘exceptional level’ of portfolio activity in 2018, last year saw hotel transaction volumes slow by £1.bn.
This represents a 3% decline compared to the 5-year average owing to lower investment activity linked to Brexit-related uncertainty and a turbulent political landscape, but remains 5% above volumes in 2017.
London remains attractive to hotel investors, with hotel investment targeting the city reaching £2.7bn in 2019, whilst its market share of total UK hotel investment increased to 43%.
Though this represented a decline of 11% year-on-year, this level of investment is equal to the capital’s 5-year average investment volume and is 10% higher than 2017 volumes.
Shaun Roy, head of hotels and specialist property investment at Knight Frank, said: “We have continued to see a strong demand for secure, long-term fixed income assets which has meant that despite uncertainty within the general investment market, investment into the hotel sector has remained strong, particularly driven by institutional investors.
“Both London and the regions continue to offer attractive propositions and returns for global and domestic investors, who recognise the growth prospects available, whilst significant opportunity exists for investors to take advantage of long-lease ground rents deals which continue to evolve and further strengthen the investment market.”