The investment market for hotels in the UK - and especially London - is holding up well, with the latest UK Hotel Investment Monitor report compiled by Savills and TRI Hospitality Consulting stating that activity in the industry so far in 2012 has been "relatively resilient". Total investment volumes for the year to date stand at GBP 1.25 billion, just five per cent lower than at this point in 2011. At the end of 2012, the value of transactions is expected to be in-line with the figures recorded last year.
Just over half (57 per cent) of total hotel investment is centred on London, with Savills and TRI Hospitality Consulting noting that overseas financiers have been particularly active in the capital, accounting for 62 per cent of the deals concluded in the city so far this year. This demographic primarily focuses on the top end of the market, with the research showing that such investors now own more than half of the assets in this class in London.
Savills noted, however, that one of the main factors restricting investment in real estate in the hospitality sector is the availability of financing, with debt funding expected to "remain restricted for the foreseeable future with shorter loan periods, higher margins and lower debt to equity ratios". This problem is not confined to the UK, with a recent Jones Lang LaSalle Hotels report into the hospitality investment market in Europe, the Middle East and Africa also highlighting the financing difficulties facing investors.
The company explained that funding is available for high-quality hotel investments, observing that "lenders have a preference for 'undoubted' locations within well-established hotel markets". Jones Lang LaSalle Hotels also pointed to new sources of funding for real estate investments, singling out mezzanine finance providers as having a "real appetite" for lending in the hotel sector, while the firm also noted many investors are hoping new debt funds that are in the process of being established will provide support to buyers in the hospitality industry in the future.