An Introduction to UK Hotel Investment

The UK hotel market is booming. This unassuming hero of the property investment sector celebrated a 29% YoY rise in investment in 2018, catapulting the full year investment volume to £7.4bn[1].

Funds, REITs, and Banks increased their investments in the sector by 42% in 2018, demonstrating the growing importance of alternative asset classes (hotel investment is categorised as 'specialist property', and sits alongside student property, healthcare  and private rented sector).

Overseas buyers accounted for a huge volume of transactions – 85% of all portfolio sales in 2018 included overseas buyers. This group invested just shy of £5bn into the UK hotel market, more than doubling its 2017 investment.

Portfolio vs. Single Assets

The nature of the main players in this investment market mean portfolio investments (i.e., a group of hotels bought and sold together) dominate. The size of those transactions also help to bolster investment volumes. So, if you want to see a true picture of the hotel market from the standpoint of an individual investor – someone who doesn’t happen to have a £1bn portfolio to play with – you need to focus on the single asset market.

Single Asset Performance

This market includes hotel rooms, the most common entry point for individual investors into the UK hotel market. Investors buy a hotel room and receive a regular income based on occupancy, with the option to sell the room on should they wish to exit. This type of investment typically starts from around £95,000 depending on location and occupancy rate, and the interest generated is the main return, although some may enjoy an uplift if the room appreciates while they’re holding. 

The single asset market in UK regional markets saw a decrease in transaction volumes in 2018 compared to 2017, but the average price per room grew thanks mainly to increased interest from overseas investors. Interest in 4* hotel rooms decreased among UK investors, with nationals instead opting for 3* or 5 * properties. The former offers a chance of appreciation while the later typically delivers more reliable returns. The average transaction price per room outside of London increased by 11% in 2018[1].

The London market even fared better. The capital remains a prize spot for hotel investors, with its popularity for overseas investors boosted by recent sterling weakness. The average price per room in 2018 saw significant growth compared to the regions, rising by 21% to £320,000[1].

Another Route to UK Hotel Investments

The UK Hotel investment market is enjoying significant growth, buoyed by increased inflows from institutional and overseas investors. But how do investors who don’t have six-figures to invest participate?

Cogress is known for providing its community access to investment opportunities previously only available to the super rich. We’ve recently signed an exclusive deal that does just that, enabling individuals to invest in portfolio assets – the top end of the market previously dominated by family offices, corporate and institutional investors.

We’ve partnered with Selina, a global hotel chain with a difference. Targeting the millennial market, Selina is revolutionising how locals, freelancers and travellers work, stay and play. Valued at $850m, the company already has 97 hotels across 19 countries.

Each Selina in each location is unique. They feature a unique combination of accommodation, coworking, food and beverage venues, activities and retail spaces. The strategy for each building is informed by a committee of local business leaders from sectors including art, entertainment and tourism; and the ultimate aim is to create a location and an experience that can be enjoyed by travellers, locals, and freelancers alike.

For more information on our hotel investment opportunities, please speak to your Investor Relations Manager or Register.

*Capital at Risk.

 

References

[1]          2019. Knight Frank. UK Hotel Capital Markets Investment Review 2019. Knight Frank.

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