01_
Cash buyers will hold the upper hand
02_
Investment will come from diverse and
new markets including China, India and
Russia, but will be London-centric
03_
Banks may seek to rationalise their
investments seeing some consolidation in
the market
04_
Transactional market likely to remain
cautious. Prices will be driven by those
able to buy now and fund later
05_
Regions will see continued variable trading
performance, but may be boosted by
Olympic ‘stay-aways’
06_
Mid-market and budget hotels will
continue to up-scale their customer bases
07_
Capex timebomb will hit owners and force
down prices on tired assets
Market
predictions
>>
2012
The lack of available debt and the
ongoing economic uncertainty
combined to repress a hotel sector
which began 2011 with high hopes
following a hint of recovery in 2010.
In many respects, 2011 can be considered a tale
of four quarters. The year began with operators
and investors alike full of optimism, following a
relatively positive end to 2010 – and the trading
environment remained largely benign.
By quarter two, that optimism was reflected
in a wave of positivity and an increase in
transactional activity – albeit partly due to
some distressed assets, like von Essen Hotels,
coming to market.
As the reality of the slow pace of recovery
hit home, and the full extent of the problems
facing the financial markets in Europe
emerged, quarter three was marked by
uncertainty and confusion. In turn, by the
fourth quarter, transactional activity stuttered
as operators and investors adopted a ‘wait
and see’ approach.
Trading performance was inextricably linked
to the economy where, as far as the UK was
concerned, it remained very much a case
of ‘London and the rest’, although even the
capital had its share of peaks and troughs in
revenue per available room (RevPAR).
Higher quality hotels in both London and the
regions suffered as consumers migrated to
mid-market accommodation, and mid-market
operators ‘up-scaled’ their customer base.
Despite this, London, buoyed in part by the
Royal Wedding and the extended Easter
holiday period in the first half of the year,
significantly outperformed the rest of the UK.
Most regional hotels struggled to maintain
occupancy levels and RevPAR fluctuated
greatly from month to month.
Transactional activity marked by
flight to quality … and distress
In uncertain and recessionary markets, the
only certainty is quality – that was typified
by transactional activity in the hotel sector.
The availability of stock was somewhat limited
–
the one exception being cases of distress.
The 26 UK luxury country house hotel assets
of von Essen Hotels (plus a Napoleonic island
fort off the Welsh coast and a French chateau
hotel) went into administration in April, with
Christie + Co instructed by the administrators
to sell the portfolio.
Market sentiment and investor appetite
determined that the portfolio would be sold
off in parts rather than as a whole. By the end
of 2011 the majority of the hotels were under
new ownership as a new quorum of country
house hotel operators emerged. The majority
of the deals were completed for cash with the
possibility of raising debt subsequently.
Andrew Brownsword’s Bath Priory Group
acquired four of the hotels, Sir Peter Rigby’s
Eden Hotels Collection added two to its
growing portfolio, while Longleat Enterprises
bought two of the hotels as it sought to
build a small portfolio near to the estate.
Patron Capital Partners, in a joint venture
with Halcyon Hotels and Resorts, acquired a
portfolio of seven former von Essen assets.
Halcyon Hotels and Resorts is owned by Nigel
Chapman, who sold five of the hotels to von
Essen when they were part of his Luxury
Family Hotels chain.
The sales of the von Essen Hotels portfolio,
the Mint Hotels in the UK and Europe to
the Blackstone Group (owners of Hilton
Worldwide) for £615 million, and the
Leicester Square W Hotel to the Qatari Al
Faisal Holdings for just shy of £200 million
all generated huge interest. They also
emphasised both the investor desire for
quality and the fact that values for quality
assets were holding up in the difficult
market conditions.
Whilst the acquisition of a controlling stake in
the Maybourne Group by the Barclay brothers
for £700 million was the headline-grabbing
deal of the year, the sales of the Aerodrome
Hotel in Croydon and a further von Essen
asset, Hotel Verta in Battersea, demonstrated
the continuing investor appreciation for
character as well as quality.
15
