Investor demand in the UK hotels market returned with gusto in 2014. Transaction volumes reached £6.1 billion, an increase of 55 per cent on the previous year, and the highest level since 2006. 71 per cent of deals took place outside the capital, though the London hotels market remained strong, with 60 per cent of single asset transactions.

There has been an increased appetite for portfolios, with deals involving multiple assets accounting for 53 per cent of hotel investment - equating to £3.2 billion - in the UK last year. Major portfolio transactions included LRG’s sale of 21 Holiday Inn hotels to Kew Green from a guide price of £70 million; Dalata Hotel Group's multi-million euro purchase of the extensive Moran Bewley's Hotels portfolio; and Lone Star's £1 billion acquisition of MREF assets which included 46 Shearings hotels and 21 Moorfield hotels across the UK.

Demand is expected to remain strong in the year ahead. In London, the demand and supply imbalance will put downward pressure on yields, while regional activity is likely to be fuelled by the break up of those multiple asset portfolios.

Further information

Savills Commercial Research produces a number of specialist reports, focusing on the hotel and serviced apartments market, helping provide insight on investment and operational performance across the sector.