Overseas investment into UK hotels hit £3.4 billion in 2018, the highest level since 2015 (£4.3 billion). Foreign capital accounted for just over half of the total £6.6 billion invested in the sector last year according to Savills.
The firm notes that 2018 levels are 87% above the long term average for overseas investment into the sector (£1.8 billion). This significant uptick can be attributed to large portfolio deals including Covivio’s £847 million acquisition of Starwood Capital’s Principal Hayley hotel platform and Israel’s Vivion Capital Partners’ acquisition of both the £742 million Project Ribbon portfolio and the £507.5 million Project Zinc brokered by Savills.
When looking at the origin of investment between 2017 and 2018, the largest increase came from the Middle East which increased its activity from £23.5 million to £1.3 billion, driven by Project Ribbon says Savills. European investment volumes experienced a 64% increase rising from £763.2 million to £1.2 billion boosted by an appetite from a wider range of European markets and portfolio activity.
European investment into UK hotels in 2017 was dominated by Sweden, with Pandox’s £680 million acquisition of the Jury’s Inn portfolio, however in 2018 several other countries made significant investment. Savills states that in 2018 the biggest European spenders were France (£859 million), Spain (£171 million) Sweden (£157 million), and Germany (£42 million). For France, Germany and Spain these investments followed a period of inactivity in 2017.
Rob Stapleton, director in the hotels team at Savills, comments: “UK hotels are an attractive proposition for a broad range of investors due to the ongoing strength of the occupational markets in spite of current political uncertainty. This is true not only in London but across key European markets and, when coupled with an abundance of equity sources and restricted stock availability, we expect to see investors continue their push into secondary markets as the hunt for yield continues.”