Deloitte: M&A deals drive UK hotel transactions market

25 August 2014 2 min. read

According to a new research from Deloitte, the hotel transactions sector in the UK could potentially face a record year in 2014. Revenues of the first half year have increased 65% compared to the last half year of 2013. 70% of the total transaction volume came from single assets and M&A’s in the regions contributed 60% of total investment.

2014 could potentially be a record year for hotel transactions in the UK, states accounting and consulting firm Deloitte. The revenues of the first half year of 2014 currently total around £1.5 billion, a 65% increase compared to the last half year of 2013. “This is the second strongest start to a year since the peak in 2007. Macro-economic fundamentals have finally caught up with investment sentiment, which has further stimulated appetite for the hotel sector. We anticipate continued strong interest from investors but a potential lack of product given the substantial capital the market has to deploy,” says Nick van Marken, Global Head of Hospitality at Deloitte.

Deloitte - Hotel transactions market

Around 70% of the total transaction volume in 2014 to date, is made up by single assets due to the lack of significant portfolio transactions. London led in terms of deal size with the £150 million sale of the Edition by Marriott to ADIA.

M&A activity
Looking at Mergers and Acquisitions (M&A), it can be concluded that deal activity that took place in the regions contributed 60% of total investment, which amounts to £780 million. According to Deloitte, this activity was driven by a number of factors, including investors looking to consolidate; banks offloading assets; distressed sales; the scarcity of London deals; and, improved trading fundamentals and higher profit margins.

Value of UK portfolio and single asset hotel transactions

Reasons for the increase in volume of hotel transactions and the competitive pursuits of deals, as named by Deloitte, are the better functioning capital markets, increased availability of debt and stronger macro-economic and trading fundamentals. Looking forward, van Marken notes: “We see many international buyers, especially from the US, Middle East and Asia, showing continued strong interest in London, and increasingly in the regions. We expect deals will close more quickly in the second half of 2014 with significant appetite on the part of private equity in particular. The UK hotel sector appears firmly back in favour.”