Hotel transaction volumes are set to reach £4.5bn in 2022, surpassing a 15 year average of £4.22bn, according to a new forecast from Savills.
It comes as year-end transaction volumes are set to total £4.1bn, which is 78% above 2020 levels, amid an “appetite growing for UK hotels”.
According to Savills, London RevPAR could be within 75% of pre-Covid levels by the end of 2022, largely driven by a strong recovery in occupancy as international leisure visitor arrivals to the city increase.
In addition, it said ESG considerations will “move further up the agenda” for operators, developers and investors in 2022 and beyond. It added that institutional demand for ESG compliant properties could see the emergence of a yield spread with tighter yields being achieved on ESG assets vs their non-ESG compliant counterparts.
Robert Stapleton, head of hotel transactions at Savills, said: “Activity in 2022 will be supported by more stock coming to the market and improving operational performance, particularly in London which has lagged the trajectory of the UK’s regional markets.
“The return of international visitors has been long awaited and we are already seeing the positive effects that growing international arrivals are having on the hospitality industry.”
He added: “However, while there is a weight of money looking to be deployed into the sector supported by the resilience of longer term demand drivers, there remains operational challenges in the short-term and uncertainty which could delay a recovery with rising Covid infection rates in the UK.
“Additionally, we expect investor competition for fixed leased assets and alongside increasing demand for ESG complaint assets, suggest that the definition of Prime, both in terms of geography and tenant, will narrow. This coupled with a relative paucity of stock in the fixed-income space means we expect to see prime yields harden further over 2022 to c.3.25%.”