Report Details Positive Outlook For UK Hotel Investment

The European hotel investment market looks set to continue its recovery in 2011...

The European hotel investment market looks set to continue its recovery in 2011 following a slump during the years of the credit crunch and the subsequent global economic downturn - with the UK segment particularly likely to see growth.

This is according to the most recent European Hotel Market Property Report from BNP Paribas, which says that while activity in the hotel investment sector "reached a floor" during 2009, last year saw the beginnings of a recovery that is expected to reach into 2011. This is thanks in part to a rebound in tourism levels and the revenue per available room (RevPAR) indicator.

Overall hotel investment in the top five European markets reached 6.6 billion EUR (5.9 billion GBP) in 2010, representing a 106 per cent rise over 2009. In the UK, investment levels accounted for almost half of this figure at 3.2 billion EUR, a 185 per cent increase compared with the previous year.

Interestingly, although international arrivals began to stabilise in the UK during the second half of 2010, the eight per cent leap in the country's RevPAR and a 4.8 per cent year-on-year jump in occupancy rates may have been due to "British outbound travellers turning increasingly inbound". The capital in particular seems to have enjoyed the lion's share of this growth, having a knock-on effect on investment trends as a result - London accounted for 65 per cent of the UK's hotel investment volume last year.

"The recovery observed in 2010 should go on in 2011 with a number of themes expected: operators' sale and leaseback (asset-light) strategy will continue, more distressed assets are likely to come on to the market, the bid-ask price gap will reduce and hotel operating performances will follow the upward trend established in 2010," BNP Paribas says.

This outlook may be further supported by recent statistics from TRI Hospitality Consulting revealing annual increases in UK hotel chain RevPAR for both the month of May and 2011 so far. May's RevPAR rose to 72.62 per cent from 67.53 per cent in the same month in 2010, while the figure for the year to date was 62.72 per cent, compared with 59.64 per cent for the equivalent period last year.

- Monday 11 July 2011

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