The forecast by international real estate advisor Savills shows a 39 per cent post-recession increase on the £6.1bn invested in 2014, with high profile portfolio sales such as the LRG2 collection of Holiday Inn Hotels (£225m) playing a large role in this.
Regional transactions have dominated the UK market this year, making up more than 78 per cent of the total spend, with US private equity houses behind 65 per cent of purchases in the regions.
Marie Hickey, commercial research director at Savills, said that the lack of hotels available in London has contributed to this trend, citing the purchase of the Malmaison and Hotel du Vin portfolio as an example.
“Availability constraints in London have attracted new overseas buyers to the regions, including Asia Pacific investors who have acquired more than £1 billion worth of regional hotel assets so far this year,” he said.
“Frasers Hospitality’s purchase of the Malmaison and Hotel du Vin portfolio at £363 million is a good example. While there were no country house hotel acquisitions by Asia Pacific investors in 2014, we have already seen five this year.”
Savills’ report highlights that the biggest barrier for institutional investors is that 80 per cent of UK hotels are owner-occupied or third-party managed, meaning that investors are looking towards new brands and concepts such as serviced apartments.
Rob Stapleton, hotels investment director at Savills, said: “The UK hotel investment market is on course for a record year as the appetite among overseas and domestic buyers in both London and the regions shows no sign of waning.
“With yields close to or at their pre-recession peak, further downward shifts will be constrained but we expect transactional activity to remain robust as the operational markets continue to show growth and portfolios acquired over the last four years are broken up.”