Hotels In ‘Staycation’ Destinations Are Attracting A Surge In Attention From Investors

The changes brought about by COVID-19 have extended the reasons for buying a hotel to a diverse range of investors, according to Colliers International

The trend for UK ‘staycation’ breaks has resulted in a spike in trade in hotels located in popular tourist destinations, according to global real estate advisor Colliers International.

Julian Troup, head of UK Hotels Agency at the global real estate advisor, said changes in tourism brought about by COVID-19 were bringing new opportunities to the UK hotels industry in the form of a diverse range of prospective purchasers.

“A significant spike in trade in hotels located in areas popular for ‘staycations’ has been observed by our teams throughout the UK, in most popular tourist destinations throughout the UK,” he said.

“All the signs are that this trend is set to continue, and that hotels in locations which benefit from ‘staycation’ holidays will attract a healthy level of interest in the months to come.

“These hotels offer buyers a great place to live, work and make profit. They should attract more funding support and, based on the impressive trading figures and forecasts we have seen, in most cases will provide buyers with a solid return on investment.”

Mr Troup said that while lockdown had inevitably impacted upon the market, Colliers International had recently seen an increase in general enquiries, with an over 200% uplift in formal viewings in July when compared with the previous month.

He added that three distinct types of would-be buyers had been getting in touch, namely investors, developers and lifestylers. While investors were being attracted by the strong fundamentals of the ‘staycation’ market; developers were interested in the opportunities offered by well-located hotels which could be changed to residential use, subject to planning permission. Meanwhile, lifestylers were seeking an escape route from the ‘rat race’.

Mr Troup explained: “An increasing flow of opportunistic investment buyers have been contacting us, presumably attracted by anticipated pricing adjustments taking place among hotels with a greater reliance upon corporate and events trade. There are still numerous well-heeled cash buyers out there, as well as plenty of overseas buyers and investors in waiting.

“We have also been receiving a noticeable increase in alternative use enquiries from developers and other types of operator. If planning rules are relaxed, we expect to see certain hotels also attracting interest for alternative use

“There has always been a steady stream of lifestyle purchasers. However, all the signs are that more people will decide they want to consider a complete lifestyle change, cannot face returning to work, and want to have an opportunity to control their own destinies.

“With many wishing to leave living and working in cities, buying a hospitality business in a location of their choice is a real alternative, particularly where the move is enforced in the event of redundancy or having to downsize. In the last recession we saw many examples of new to the industry buyers who took advantage of being able to invest redundancy monies as well as releasing equity from their house sale.”

Mr Troup added that the resilience of the market was demonstrated by way in which even during the lockdown, Colliers had completed a number of sales, notably Boscundle Manor in Cornwall; The Radnorshire Arms hotel in Presteigne, Powys; The Angel & Royal, in Grantham; the historic 15 bedroom The George Hotel in Easingwold, North Yorkshire, and traditional coaching inn, The Bull Hotel in Burford, Oxfordshire.

He said: “This range of interest from potential purchasers so soon after some pessimists were fearing the worst for the market comes as no surprise for those of us who can recall the foot and mouth outbreak back in 2001. At that time, there was concern that visitors would not return to areas such as the Lake District. Of course, we now know that they have – in droves.

Mr Troup noted that prior to the outbreak of COVID-19, the market had been heating up as overseas investors moved in to take advantage of the weakness of sterling.

“At Colliers International, where we typically have over 200 UK hotels for sale at any one time, we had been transacting on between 80 and 100 hotels and hospitality businesses each year and our pipeline was solid on the back of a strong Q1,” he said.

He added that the hotel industry appeared to be in a good place to benefit again from domestic travel, and that although overseas travel is now permitted with quarantine restrictions for those returning from some countries, a substantial number of holidaymakers were likely to take the option of replacing a fortnight in the Balearics with the three-to-four-day ‘coast and country’ breaks taken in the UK and Ireland.

“National Parks and areas of outstanding natural beauty, plus destinations offering leisure attractions will all prosper. This is already evidenced with clients experiencing a strong spike in domestic leisure hotel trade – and also by the queues that can be seen at weekends on motorways leading to holiday areas, such as the M5 to Devon and Cornwall,” he said.

“People who are working will still be expected to take their annual leave, so I feel sure we will continue to see “staycation” being regularly used as a means of escaping the confines of working from home  The UK is home to a number of beautiful retreats and has everything to offer, from coastal and seaside resorts to active and countryside holidays.

“UK hotels have been proactive in responding to public anxiety about COVID-19 by providing demonstrably safe, clean accommodation featuring heightened cleaning protocols and standards. Those businesses with extra space will benefit as they will be better able to provide social distancing and greater comfort, but all hotels are reconfiguring to ensure that social distancing can be maintained.

“Hotels will adapt their offering to the changing times in which we are living, and business will return. With all this in mind, we anticipate movement in the transactional marketplace will start again as early as Q3 of 2020.”