United Kingdom hotel transaction volume rebounded in the first half of 2022, albeit from a low base still coming to grips with the fallout from the COVID-19 pandemic.
In the first half of 2022, U.K. hotel transactions were down 32% compared to 2019 levels, but up approximately 32% compared to the first half of 2021.
Business advisory Christie & Co.’s U.K. Hotel Market Snapshot 2022, which covers the first six months of 2022, tallied U.K. hotel transactions at 1.9 billion pounds sterling ($2.3 billion), a 32% year-over-year increase. Individual transactions accounted for a little more than half of the total volume for the first six months of the year.
According to STR, CoStar’s hotel analytics company, U.K. hotel transaction volumes in the fourth quarter of 2021 did match pre-pandemic levels.
Peer firm Knights Frank’s Intelligence Lab reported 6 billion pounds sterling in transactions for full-year 2019, despite concerns that the effects of Brexit might mute deal volume.
The high point in U.K. hotel transaction volumes was 2015, according to Christie & Co., with 8.5 billion pounds sterling invested in U.K. hotels.
At November’s Alvarez & Marsal European Hospitality Investment Conference, investors said two trends are driving the increase in U.K. transactions. First, investors continue to have faith in the hotel real estate asset class as a way of diversifying their portfolios. Second, a great deal of capital is still on the sidelines ready to be deployed.
Distressed pricing expected in 2023 could also increase the level of hotel investment.
Portfolios
Five notable U.K. hotel portfolios changed hands in 2022.
The Harris Family and Kings Park Capital bought the 31-asset Inn Collection Group from Alchemy Partners for approximately 300 million pounds sterling, a deal spurred by the increasing popularity of country hotels during the pandemic. The collection has approximately 500 rooms, and one of its latest acquisitions was the 38-room Wordsworth Hotel in England’s Lake District National Park.
U.S. private-equity firm KSL Capital Partners bought The Pig Hotels Group for an undisclosed price from owner Home Grown Hotels, and plans to grow the lifestyle brand organically. The Pig currently has 208 rooms in nine hotels in its portfolio.
Tristan Capital Partners acquired a majority stake in Raag Hotels, which owns “budget boutique” brand Point A Hotels. The price was 420 million pounds sterling and includes 10 hotels — seven in London and one each in Dublin, Edinburgh and Glasgow — and 1,347 rooms.
Tristan Capital Partners plans to grow the Raag Hotels portfolio by two to three hotels per year, first in the United Kingdom and Ireland and then potentially expanding across Europe. Management will continue to be overseen by Queensway, which remains a minority owner. With the deal, U.K. charitable foundation Wellcome Trust completely exited the hotel industry.
Leicester-based Atlas Hotels in a joint venture with affiliate London + Regional Hotels acquired the six-hotel Chardon Group, which has a 569-room hotel portfolio with properties in the Scottish cities of Dunfermline, Edinburgh, Glasgow and Perth. Atlas now has approximately 7,400 rooms in 60 hotels across the U.K., and more might be added. L+R’s management stated a fund of approximately 200 million pounds sterling is available for expansion.
In January 2022, New York City-based owner Fortress Investment Group bought a majority stake in Irish hotel and aparthotel firm Prem Group for an undisclosed price. In the deal, Fortress acquired 38 hotels and more than 3,000 rooms, mostly in Ireland and the U.K. but also in Belgium and The Netherlands.