Monday, August 25, 2023
Knight Frank's UK Hotel Review
During 2007, the Leeds office of global property consultancy Knight Frank concluded hotel deals worth £54m, according to Knight Frank's UK Hotel Review.
The most notable transaction was the sale in April 2007 of the 99-bedroom Monkbar Hotel in York off a guide price of £13 million by Leisurepoint to Shiva Hotels.
More recently Knight Frank handled the sale of the historic Hazlewood Castle, near York, on behalf of owner Brian and Andrea Walker to Ashdale Hotels for an undisclosed sum.
The UK Hotel Review, which has just been published, reveals that much of the UK hotel sector continues to show growth, although occupancy rates are expected to come under increased pressure, as slight downward shifts are being recorded.
Leigh Parsons, hotels partner in Leeds, commented: "Currently there is considerable uncertainty surrounding the property market in the region. Many commentators are predicting a fall in values across both residential and commercial sectors in the coming year.
"While the Yorkshire hotel property market is unlikely to avoid some turbulence, two factors remain which bode well for the sector. Firstly, demand exceeds supply for good quality hotels and secondly, funding is still available for suitable purchasers looking to buy appropriate properties. As a result of these trends, we do not currently foresee a significant decline in hotel values," he said.
2007 saw robust UK transactional activity, despite a slowdown in portfolio investment during the second half of the year that has continued into 2008. The market for single hotel assets showed reasonable strength during 2007 and the first quarter of 2008.
Other key findings of the report were:
- The rapid rise in utility costs and the introduction of mandatory energy efficiency certification is raising the importance of energy consumption in the hotel sector.
- Premium brands are increasingly being sought in mixed-use developments in order to increase marketability and the value of associated residential and commercial elements.
- The appetite from debt providers that understand the cash flow of a hotel remains reasonable, although post the credit crunch the number of lenders has reduced and most require significant comfort on debt cover.
- Consumer spending is expected to slow during the remainder of the year, and this together with rising inflation is likely to impact on hotel cash flows.
- In spite representing only a small proportion of total carbon emissions from commercial buildings, the issue of energy use in the construction and operation of hotels is rapidly gaining prominence within the industry. The rapid rise in energy costs and the introduction of legislation aimed at making commercial buildings more energy efficient are key drivers in this process.
Leigh Parsons commented: "We are seeing a bit of a stand-off in the hotel sector in the north at the moment; purchasers (and there are still many out there and they have cash) are reluctant to commit to a purchase or are making offers at significant discounts to the asking prices, perhaps thinking (dare I say even hoping) that prices will fall in the next few months. However, since business is still generally pretty good, there appears to be no immediate pressure on most vendors to significantly reduce their price and they are prepared to sit tight if necessary.
"Many banks are making the right noises: telling us that there are plenty of funds available for well qualified purchasers for businesses showing good profits. What we are finding though is that they are reluctant to place much weight on future projections and are lending on current and historic trading performance only to ensure that any debt can be serviced from trading profit.
"This stand-off cannot continue for too much longer - something has got to give. Perhaps the property market will turn the corner and all the pent-up requirement will suddenly appear as a flood of offers. Or perhaps vendors will start to realise that the 'correction' is long term and that they would be foolish to hold out for a price which may not be attainable for years to come. Either way I can see that activity must pick up soon," he explained.
The most notable transaction was the sale in April 2007 of the 99-bedroom Monkbar Hotel in York off a guide price of £13 million by Leisurepoint to Shiva Hotels.
More recently Knight Frank handled the sale of the historic Hazlewood Castle, near York, on behalf of owner Brian and Andrea Walker to Ashdale Hotels for an undisclosed sum.
The UK Hotel Review, which has just been published, reveals that much of the UK hotel sector continues to show growth, although occupancy rates are expected to come under increased pressure, as slight downward shifts are being recorded.
Leigh Parsons, hotels partner in Leeds, commented: "Currently there is considerable uncertainty surrounding the property market in the region. Many commentators are predicting a fall in values across both residential and commercial sectors in the coming year.
"While the Yorkshire hotel property market is unlikely to avoid some turbulence, two factors remain which bode well for the sector. Firstly, demand exceeds supply for good quality hotels and secondly, funding is still available for suitable purchasers looking to buy appropriate properties. As a result of these trends, we do not currently foresee a significant decline in hotel values," he said.
2007 saw robust UK transactional activity, despite a slowdown in portfolio investment during the second half of the year that has continued into 2008. The market for single hotel assets showed reasonable strength during 2007 and the first quarter of 2008.
Other key findings of the report were:
- The rapid rise in utility costs and the introduction of mandatory energy efficiency certification is raising the importance of energy consumption in the hotel sector.
- Premium brands are increasingly being sought in mixed-use developments in order to increase marketability and the value of associated residential and commercial elements.
- The appetite from debt providers that understand the cash flow of a hotel remains reasonable, although post the credit crunch the number of lenders has reduced and most require significant comfort on debt cover.
- Consumer spending is expected to slow during the remainder of the year, and this together with rising inflation is likely to impact on hotel cash flows.
- In spite representing only a small proportion of total carbon emissions from commercial buildings, the issue of energy use in the construction and operation of hotels is rapidly gaining prominence within the industry. The rapid rise in energy costs and the introduction of legislation aimed at making commercial buildings more energy efficient are key drivers in this process.
Leigh Parsons commented: "We are seeing a bit of a stand-off in the hotel sector in the north at the moment; purchasers (and there are still many out there and they have cash) are reluctant to commit to a purchase or are making offers at significant discounts to the asking prices, perhaps thinking (dare I say even hoping) that prices will fall in the next few months. However, since business is still generally pretty good, there appears to be no immediate pressure on most vendors to significantly reduce their price and they are prepared to sit tight if necessary.
"Many banks are making the right noises: telling us that there are plenty of funds available for well qualified purchasers for businesses showing good profits. What we are finding though is that they are reluctant to place much weight on future projections and are lending on current and historic trading performance only to ensure that any debt can be serviced from trading profit.
"This stand-off cannot continue for too much longer - something has got to give. Perhaps the property market will turn the corner and all the pent-up requirement will suddenly appear as a flood of offers. Or perhaps vendors will start to realise that the 'correction' is long term and that they would be foolish to hold out for a price which may not be attainable for years to come. Either way I can see that activity must pick up soon," he explained.
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