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  • Writer's pictureRealFacts Editorial Team

Private Equity Surge: Why Investors are Flocking to UK Hotel Portfolios

The UK

The UK hotel market in 2024 is experiencing a significant resurgence, as highlighted in a recent Bisnow article by Mike Phillips. Private equity firms are driving this revival by acquiring large portfolios of mid market hotels. This year has seen four major deals totaling £3 billion, surpassing the £2 billion in transactions for all of 2023. Leading private equity giants such as Starwood, Ares, Blackstone, and KKR have been actively purchasing over 75 hotels across the UK, propelled by lower debt costs, realistic seller pricing, and improved hotel performance.

Several factors contribute to this surge. Lower debt costs, realistic seller pricing, improved hotel performance, and the emergence of specialized asset managers have made the sector attractive to opportunistic investors. “All of these portfolios are being bought and sold for slightly different reasons, but there are some secular themes there,” said Kenneth Hatton, CBRE's Head of Hotels for Europe. “The balance between supply and demand for hotels is good, and performance compared to 2019 is not fully back but is almost ahead of 2019 levels, with the expectation of more growth to come.”

Starwood set the tone in January by acquiring 10 Radisson hotels in London from the Edwardian Group for £800 million, the most upscale transaction among recent deals. In May, Ares purchased an 18-hotel portfolio from Landsec for £400 million, taking over operations from AccorInvest. KKR is reportedly close to acquiring 30 Marriott hotels from the Abu Dhabi Investment Authority for £900 million, and Blackstone is in talks to buy Village Hotels from KSL for approximately £850 million.

Debt costs have stabilized significantly compared to 2023, making leveraged acquisitions more viable. The five-year swap rate in the UK has dropped nearly 150 basis points since last year, increasing profitability for debt-backed buyers. Competition from lower-cost capital buyers has decreased, allowing private equity firms to negotiate better deals. “The bid-offer gap between sellers and buyers is compressing,” noted Felicity Black-Roberts, Hyatt’s European Vice President of Acquisitions and Development.

Mid Market hotels, with smaller staffs and less exposure to wage inflation, are strategically attractive. Investors are upgrading assets, improving sustainability credentials, and rebranding to enhance value. Specialized asset managers like Amante Capital and EQ are partnering with private equity firms, making the sector more accessible. “As the market has become more mature, there are an increasing number of third-party asset managers that are credible, and that is allowing more and more investors to come to the sector that we haven’t seen previously,” Black-Roberts said.

The UK hotel market’s recovery in 2024 underscores the sector's attractiveness amidst broader real estate challenges. With favorable financial conditions, strategic acquisitions, and efficient management practices, private equity firms are well-positioned to capitalize on the ongoing recovery and future growth of the UK hotel industry.


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