UK Hotel Market Beat

Investment Trends

The second half of 2022 saw transaction activity hampered as a result of rising costs of debt and economic instability in the UK and Global markets. Looking forward, we expect transaction volumes to see a slow start in 2023, with an uptick in activity within the second half of the year. Hotels remain an effective hedge against inflation which, combined with the return of international capital and pricing consensus, should support activity within the sector.

Prime Yields

Limited transactional evidence within recent months has restricted transparency on the outward yield shift. There is evidence that certain deals have seen an outward movement of c. 100 bps in secondary markets, while prime assets are expected to hold their yield profile. Yields are expected to stabilise as inflation falls in the second half of 2023.

Market Performance

Trading performance for the full year was a positive story as the UK market surpassed 2019 benchmarks, especially within secondary leisure destinations. London experienced a slower recovery but made a strong comeback in the second half of 2022. Looking ahead, cost pressures are expected with rising utilities and increased wages, offset to a degree by the sector-wide rebase in business rates.

Supply

A number of notable hotels opened in 2022, among which were the art’otel Battersea Power Station and Fairmont Windsor Park. UK-wide, a total of 10,860 rooms were delivered (30% in London). The Mandarin Oriental Mayfair, The Peninsula and the Old War Office Raffles are set to open in 2023 as London is anticipated to deliver an additional 7,500 keys (+5%). Certain UK markets are experiencing suppressed supply at present, with stock allocated to government contracts.

Demand

Demand is on a strong path to recovery, with total nights in accommodation for the UK up 102% on 2021 (Oxford Economics). UK-wide occupancy figures are well on their way to reach pre-COVID levels, as full-year occupancy figures for 2022 sat at 94% of 2019 (STR). Looking forward, we expect domestic demand to remain robust. However, purchasing power may take a hit in line with the cost of living. This might be offset be the growth of international demand, underpinned by the favorable exchange rate.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more.

For additional information, visit www.cushmanwakefield.com

Jack Wallsworth
Associate
+44 207 152 5803
Cushman & Wakefield