Hotel investment tops £1bn in bumper start to year
UK hotels attracted more than £1bn investment in the first quarter of this year, as the sector defies business rate rises and market uncertainty caused by the Iran war.
Hotel investment volume surpassed £1.1bn in the first three months of the year, marking a 63 per cent increase on the £680m recorded in the same period last year, City PM can reveal.
The huge investment comes as many hotels brace for higher business rate bills, due to property revaluations which took effect today.
Investments in a string of major hotel assets has boosted the hotel investment sector so far this year, according to data from real estate advisors Savills.
These include Marriott Grosvenor Square, Radisson Blu Leicester Square and Mayfair’s Grafton Street development.
Savills said capital is flowing into the sector as a “borrower-friendly” debt environment encourages investors.
UK hotel market proves resilience
Thomas Emanuel, head of hospitality thought leadership at Savills, told City PM: “The sharp uplift in Q1 investment volumes reflects strengthening investor confidence and the continued resilience of the UK hotel market.
“London remains a standout performer, particularly in the large scale and luxury segments, and we expect further transactional activity as new high‑quality stock comes to market.”
The Chancellor announced changes to the business rates system at last year’s Budget which were intended to make the tax fairer for hospitality and retail businesses.
But the property revaluations mean bills for hospitality businesses – including hotels – are set to rise anyway.
The Treasury later announced a £300m emergency relief package for pubs, but excluded hotels and restaurants.
Hotel business rate bills climb by nearly £30k
The average business rate bill facing a UK hotel climbed by 30 per cent – amounting to an extra £28,900 – from April as revaluations of property values which dictate the tax came into force.
These bills will continue to climb towards the end of the decade, with the average business rate charged to a hotel set to climb by 115 per cent by 2028/29 – an increase of £111,300 – according to hospitality trade bodies.
Emanuel said: “The changes to business rates which come into force from today are likely to impact hotel operators unevenly, and pressures will intensify over time.
“How operators choose to respond remains to be seen. With further tax changes ahead, uncertainty persists, and in areas facing the steepest increases we may see some combination of higher prices, tighter margins, or a gradual shift towards more tech-led and streamlined operations.”