Domestic travel will continue to prove attractive, and investors are set to benefit from new entry opportunities in the hotel sector
The boom in staycation demand is expected to continue in 2022 as customers look to holiday domestically, and hotel owners look to sit tight on their assets, predicts Colliers.
While the latest variant of COVID-19 continues to grip the country and fears that further emerging variants could result in last minute travel restrictions being imposed by the governments at home and abroad it looks increasingly likely that the staycation boom of the last two years will continue in 2022.
“In 2021 we saw hotel occupancy levels in cities outside of London, particularly in rural and coastal areas, perform extremely well,” said Julian Troup, head of the Hotels team at global commercial real estate firm Colliers. “There is a real belief amongst operators that the UK staycation will continue at least until the end of 2023. Many customers are still uncertain about the prospect of overseas travel, coupled with the fact that they’ve had enjoyable experience in places they have never visited in the UK before.
“While it is likely that overseas travel will return to a certain extent, some surveys suggest that consumers are considering both a domestic and international break in the next year.”
Staying put was also the trend of 2021 for hotel owners, with many holding onto their assets due to concerns that recent limited revenue reporting would result in a price discount. However despite the limited stock levels, Colliers has sold 76 hotels during the last 12 months and has seen that in prime locations, quality businesses, most predominantly leisure-based hotels, have actually exceeded pre-COVID prices.
“As we head into 2022 the prospects of distress in the sector seem to have weakened,” Julian added. “However the continued uncertainty and operational challenges have left many hotel and hospitality business owners with serious operational fatigue.
“And whilst many hoteliers have seen occupancy and rates come back stronger than expected, many of these business are operating using short term debt provided by supportive banks. It is likely that lenders will take a tougher approach in the coming year as the Government relieves the pressure put on them to support these businesses. This may provide opportunities for investors and reduce stock scarcity which is underlining asset values at present, especially on well located quality assets.
“There certainly remains a substantial level of interest from domestic and international investors in the market - it is likely to be another busy year."
“With few assets coming to market attention could now turn to the development side of hotels,” adds Marc Finney, head of Hotels & Resorts Consulting. He added: “Although there is a continuing rise in constructions costs, there is also a fierce competition to place money within the sector, driven by an increase in debt funded investors. It may mean development becomes a more viable option for those looking to invest, as opposed to battling it out to secure the limited assets which come to market.
“As we’ve seen the domestic leisure market has boomed over the last few years and this is expected to be sustained, so there are opportunities for developing well located experience-based hotels in the coast and country areas.”
