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Are UK hotels a good investment?

05/04/2022

The UK hotel sector is one that was significantly impacted by COVID-19. Lockdowns and travel restrictions meant that the industry suffered significant revenue losses – putting many independent hotels out of business. 

But with all COVID restrictions now removed and the travel sector returning to something resembling normal, are UK hotels a good investment right now? 

Solid performance in 2021

While 2021 was a disappointing year for the UK hotel industry, 2021 saw performance bounce back strongly. Data from Knight Frank reveals that the UK hotel sector saw £4bn of investment volume in 2021 – more than double the transaction volumes seen in 2020. 

This growth, they say, came from both London and regional UK transactions. And they expect performance to continue strongly in 2022, stating that “increased hotel demand, the continued improvement in profitability and visibility for future trading have all contributed to improving investor and lender sentiment towards the sector”.

Questions around business travel

Grant Thornton take a more “cautiously optimistic” approach to 2022 predictions – particularly when it comes to business travel. They highlight that many hotels – particularly those located in city centres and airports, and those that have conference facilities – will be fairly reliant on business clients. While international travel has returned, they question whether it will actually return to pre-pandemic levels, or whether the rise in hybrid working will eliminate the need for as many face-to-face meetings and large-scale events. 

A game of two halves

In the industry, it seems that there is a great deal of optimism for the leisure sector, with predictions more cautious for business travel. In both cases, international travel may affect performance, with a Property Week article stating that “the recovery in international travel, particularly from long-haul destinations, is likely to build more gradually across 2022 and subsequent years”. 

However, as with many investment types and sectors, Property Week and others recommend taking a longer term look at the industry and individual operators within it before making an investment decision. 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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