Hotel transaction activity across the UK totalled around £300m in the second half of 2012, significantly behind the volume and values reported in H1 2012 (c. £1bn) and H2 2011 (c. £2.5bn), according to analysis by Deloitte, the business advisory firm.
Nick van Marken, global head of hospitality at Deloitte, commented: “Some recovery in the UK hotel transaction market was apparent in 2011, mainly in the second half of the year, and this continued into the first months of 2012. However, activity slowed in the second half of 2012 – whilst there are a number of transactions in the pipeline, we saw very few get across the line.
“Consistent with the first half of 2012, single asset transactions dominate and London remains the focus for most investors. The lack of readily accessible debt financing remains an ongoing constraint across the UK and has made it difficult to close on large portfolio deals in particular.”
Single asset deals continue to be dominated by London where pricing remains strong. The most notable transaction was the acquisition of the Cavendish Hotel by the Ascott Group for £159m.
Outside the capital, distressed sales dominated the market. These included the sale of the Glasgow Radisson to Azure Properties; Hyatt Hotels Corporation’s acquisition of the Hyatt Regency in Birmingham and KSL Partners’ acquisition of the Belfry.
Looking to the prospects for the market in 2013, van Marken remarks: “There are a number of portfolio and single asset transactions that are currently being marketed.
"As a result, activity is expected to pick-up. That 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.”