Property adviser, Christie & Co, has launched its annual Business Outlook report, ‘Business Outlook 2021: Review. Realign. Recover,’ which reveals that the hotel sector has remained buoyant and investor demand remains very robust, with speculative buyers continuing to chase well-placed opportunities in the current market.
There is light at the end of dark tunnel as the company predicts that the vaccine rollout will drive recovery of the staycation market.
The report goes on to outline headline impacts of COVID-19 on the sector and their response, along with market trends, activity and the funding landscape.
Christie & Co completed on over 70 hotel deals across the UK during the year. Notably, 96% of these properties were bought by domestic buyers and 6 out of 10 deals were cash funded.
A key market trend for 2020, as highlighted in the report, is the resurgence of rural and coastal markets, largely driven by international travel restrictions which encouraged an increase in domestic holidaying and ‘staycations’.
In this year’s report, Christie & Co also surveyed a pool of hotel operators to gain an understanding of sentiment within the market, and the outlook for business operations in 2021.
The report indicates optimism for recovery in the year ahead is mixed, albeit generally most operators feel “fairly positive” about the market beginning some recovery, particularly corporate operators and investors.
Overall, the majority of the sector (72.4%) estimate it could take up to three years for the market to return to pre-COVID trading levels, which is reflective of the severe impact the pandemic has had on business and trade in 2020.
For the first time since 2012, Christie & Co’s hotel price index for 2020 saw a decline in average sale prices of 7.6% on the previous year, with both corporates and independent hoteliers feeling this will continue into 2021. Our past experience, along with the sector’s proven strength in overcoming difficult economic times, looks forward to the industry and pricing swiftly bouncing back.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
· The ongoing vaccine rollout will drive recovery of the staycation market from Q2 2021 whilst international and corporate demand should slowly materialise during H2. RevPAR recovery this year will be the strongest ever recorded but full recovery to pre-COVID levels will take several years, influenced by more subdued ADR growth.
· The easing of government support in the form of grants, rates relief and rent moratoria from Q2 onwards, as well as shifting lender sentiment as banks review their bad debt positions as a result, will lead to increased distressed activity.
· The record levels of new capital raised will mobilise in this window of attractively priced opportunities, particularly with regards to distressed assets. Subject to adequate supply, we anticipate heightened M&A activity during 2021.
· The pandemic is likely to result in the permanent closures of smaller, unviable hotels across the country; however, we anticipate strong demand for these non-trading sites from a variety of alternative uses.
Carine Bonnejean, Managing Director of Hotels at Christie & Co, said, “Despite all the unprecedented challenges and uncertainty our industry has faced in 2020, our experienced team across the UK has demonstrated that deals can be achieved in the current environment. Undoubtedly, we will see even more opportunities coming to market this year and our key focus is to deliver the best outcomes for our clients.”