UK Hoteliers Facing Commercial Property Decline

Reports show that hotel transactions in the UK during the first three quarters of 2008 have declined by 69%. The credit crunch has directly impacted the hotel transactional market and commercial property transactions within the hotelier market are notably down. One of the biggest transactions so far this year has been the sale of a 50% stake in the Jurys Inn Chain, showing that during these hard times it is the budget sector that continues to generate interest from commercial property investors, especially those from the Middle East. This is backed up by news from Travelodge who are seeing a continuous shift of customers moving towards budget accommodation, especially amongst business travellers. This has led them to buy several more properties and to plan a joint venture with budget supermarket chain Aldi.

Good economic conditions and favourable credit options meant that 2005 to mid 2007 were extremely good years for the hotel transactional market. However, over the last year or so the lack of available debt and increased costs has seen a sharp decline of transactions within this marketplace. The current economic climate is not a healthy one for the UK hotelier commercial property market but, there are still opportunities for financially strong real estate buyers to make some extremely clever investments. Commercial properties that come on the market as a result of the credit crunch could be snapped up at bargain prices and could prove to be valuable long-term investments.

UK hotel owners have seen declines in room rates, occupancy and room yield throughout 2008. As a result hoteliers have been providing increasingly discounted rates in order to entice more customers and stop customers from transferring over to the budget hotel market. Despite this the PKF Hotel Consultancy services latest report showed that room rate, occupancy and room yield were down in London and throughout the UK.

The US hotel market is seeing similar if not stronger declines over this same period. Understandably it seems to be the tourist areas such as warm weather, leisure-orientated and seasonal markets that have been and are predicted to be worst affected. The PKF report shows that five of the top seven forecast city declines in revenue per available room are expected to occur within the state of Florida. So far most US hoteliers have stood their ground and have not been providing discounted rates despite the declining demand, in fact room rates actually increased in some areas in 2008. However, in 2009 a decline in room rates is expected as a result of the current demand decline. As a direct result further decreases in hotel commercial property and commercial real estate transactions are forecast throughout the US.



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