With the current lockdown easing and summer around the corner, it’s not just the UK public that are on the hunt for good regional leisure-led hotels. Savills has experienced fierce demand for regional assets in holiday destinations, transacting over £14 million of hotel assets in the South West so far in 2021 with another £17 million worth of assets under offer.
Following the first lockdown, we saw resilient demand for UK staycations in summer 2020. Performance in these regional and leisure-led markets was robust and in excess of what would be expected in a normal trading year. This same resurgence of consumer demand was experienced when the 2021 roadmap out of lockdown was released with strong forward bookings reported by our clients and at levels exceeding that of normal years.
Alongside consumer demand, the positivity surrounding this performance saw resilient investor appetite for regional, leisure-led trading assets. Opportunities that are introduced to the market have been quickly snapped up, often in excess of the guide price and with multiple under bidders.
Assets located in holiday destinations are the most popular with the recent sale of the Treloyhan Manor Hotel in Cornwall a good example. Sold out of administration, Treloyhan was launched to the market at a guide price of £1.75 million. The sale completed approximately 70 per cent in excess of the original guide price with over 15 under bidders.
Most buyers are currently UK based and all of this activity is despite challenges in the availability of conventional debt in the marketplace with deals being primarily cash funded or with debt secured on assets outside of the hotel/leisure space. As businesses reopen and cashflows return we expect the debt market to improve. We can also expect the buyer pool to broaden and overseas investors, who have who have been largely absent since March 2020, to re-enter the market as international travel becomes more straightforward.
Consumer demand for stays in UK regional hotels looks set to remain strong which will underpin longer term investor demand for these assets. Pre-Covid, environmental concerns around international travel were already shaping consumer habits to holiday more locally. Additionally, we all know that many weddings have had to be postponed and so demand for function and event space is expected to be robust in the medium term as this backlog is cleared.
While there are clearly still challenges ahead, the regional leisure-led hotel market is positioned well coming out of the pandemic with both consumers and investors searching for their perfect UK staycation asset.
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