Recovery predicted in hospitality property market for 2010

Christie & Co's Business Outlook 2010 report shows that values in the hotel property market fell 19.5 per cent last year. Pub values dropped 20.1 per cent while restaurant values fell 18.1 per cent.

David Rugg, chairman of Christie & Co said despite 2009 being a difficult year in the business property sector, sales, which slowed to 'a relative trickle' at the end of 2008 found their base level in 2009.

"Although trading conditions proved tough across all sectors, operators successfully mitigated losses by focusing on reducing costs and providing value for money goods and services. It is worth noting that most of the business failures in our sectors were due to overleveraging, or unsustainable rent commitments, rather than as a result of poor trading," he said.

Outlook for 2010​

For the coming year, the property agent predicts that restaurant operators will need to adapt to consumers' changing perception of value to enable them to survive.

"Consumers have become more strategic in where they plan to eat out, researching the best deals. Brand loyalty is being replaced by consumers switching between different operators, searching out the best deal for that day or week," said Simon Chaplin, head of restaurants at Christie & Co.

"Operators will also look to strip back factors that customers may not value and allow them to undertake part of the dining occasion themselves."

Christie & Co's head of pubs, Neil Morgan foresees growth in the freehouse pub market as national chains continue to dispose of freehold sites with operators such as Peach Pub Company, Geronimo Inns and Brunning & Price continuing to take advantage of expansion opportunities. However he predicted that large operators will continue to make disposals in 2010.

He said: "Although 2010 is unlikely to see any significant sector consolidation, the number of debt-for-equity swap deals that have taken place over the last 18 months could lead to a number of banks exploring exit strategies in two or three years' time."

Hotel groups with access to funding and who can act decisively will boost transactional activity over the next year, according to Christie & Co's head of hotels Jeremy Hill, although there may be a lack of availability of popular sites, particularly in cities.