Surge in hotel buyer interest since lockdown eased

As lockdown restrictions began to lift on 27 April, there was a surge in hotel buyer enquiries (a rise of 84% up to 22 June) and viewings, according to Christie & Co.

The business property adviser's first Buyer Registration Index found that demand from hotel investors remained very strong during this period as they chased opportunities in the market for both closed and existing businesses. Christie & Co expects this general trajectory of increased activity to be maintained, particularly as banks begin to focus more on new lending.

Over recent months, Christie & Co has seen a notable increase in searches for rural and coastal businesses, as many buyers are now looking to relocate from more densely populated towns and cities.

Additionally, the continued low interest rates and a rise in unemployment will potentially lead people to look for other investment and career opportunities. Operational real estate provides an attractive proposition for many people, which could explain the increased buyer activity, it said.

The index also revealed that the hotel industry has seen one of the biggest upticks in buyer registrations, with the average rise found to be 70% per sector. On the advisory side, Christie & Co has witnessed increased activity in development appraisals and strategic estate reviews to identify potential liquidity levers as well as lease advisory.

Carine Bonnejean, managing director of hotels at Christie & Co, said: "The last few months have been incredibly hard for the hotel industry, which has seen a severe halt on business operations. But, despite this, it has remained resilient and we are seeing that investors still have a strong appetite for this market.

"From 4 July in England and 15 July in Scotland, hotels were allowed to reopen, which will have been a massive relief for industry operators. As we enter the summer period, booking websites and reservation platforms are reporting unprecedented levels of enquiries as domestic guests are keen to escape for a leisure break in seaside and rural destinations. This provides a great opportunity for some hotels to capitalise on this short-term demand boost and collect some well-needed cash liquidity.

"Fast forward post-summer, and the market outlook is more uncertain. International travel and business demand, most particularly MICE, will take time to recover and we do not anticipate the market to return to pre-Covid-19 levels until 2022, at the earliest. Unfortunately, over-rented or over-leveraged hotels may not be able to wait that long and we have already seen a few casualties. Additionally, government support is being slowly phased out and deferred payments will start to impact cash flows. As such, we do expect to see a pickup in distressed situations towards the later end of 2020/early 2021."

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