UK hotel investment trading down 70% in ‘turbulent’ 2020

By the end of 2020, hotel investment volume had declined 70% in a turbulent year for hotel trading performance, according to property consultant Knight Frank.

However, the firm said it expects a strong recovery during the second half of this year, driven by the mass vaccination campaign.

The 2020 investment volume totalled £1.8 billion which compares to total investment of £6 billion in the previous year. Knight Frank also points out that 81% of the transaction volume occurred in the first quarter (£1.5 billion).

London was among the worst hit. While it had accounted for 76% of the UK total in 2019, it suffered a 49% fall in transaction volume. The £750 million sale of The Ritz (pictured above) contributed more than half of the total of £1.4 billion.

Knight Frank says among the reasons for the fall was economic disruption, forced temporary hotel closures as well as restrictions on travel and social engagement, due to the pandemic. Although overseas investment declined by 44%, Qatari, Israeli, USA, Singaporean, Thai and European investors accounted for 63% of the total UK hotel investment.

“Despite the extreme challenges that the UK hotel sector is enduring, the long-term fundamentals remain positive and the sector will recover as the economic landscape starts to revive,” Knight Frank head of hotel agency Henry Jackson said. “Achieving a successful mass vaccination campaign is vital to the lifting of the current trading restrictions imposed on the sector, which in turn will lead to an increased level of hotel investment.”  

Knight Frank said that there is potential for owners to bring assets to market in Q1, as vendors look to capitalise on limited sales opportunities.

When the UK’s mass vaccination campaign advances, there will be strong demand for hotels in the second half of 2021, the firm said.