Colin Hall, our Head of London Hotels and director in the Hotels Agency team, is celebrating 25 years of experience in the sector.
He is a specialist in central London hotel brokerage and has worked for Colliers for 19 years, dealing with the sale and acquisition of all types and sizes of London hotels, with prices ranging from £2million to more than £200m. Here he reflects on the market over the past 25 years, and gives his thoughts on the future:
1. What have been some of the most significant changes in the London hotel industry in the last 25 years?
When I started in industry back in 1996, there were 90,000 hotel bedrooms in London. Now 25 years later this has doubled to 180,000. This has led some to comment that London has become over-bedded, but in reality overseas visitor numbers to London have doubled, so the increase is definitely justified. With international visitors making up 71 per cent of all room night demand (prior to COVID-19) the fundamentals of the business have remained solid.
Another noticeable change is that the average standard of hotels has improved, both because of more branding and because of the advent of online reviews.
2. What have been some of your most rewarding or interesting deals and why?
Over the years I have worked with some remarkable clients and built many solid relationships. There are people I am still dealing with now that I did my first deal with more than 20 years ago. I’ve sold numerous hotels twice, and have even sold two hotels three times; the 117-bedroom Park International Hotel in South Kensington was sold at £7m, £12m and £21m over a 10-year period, whilst the 50-bedroom Tophams Hotel in Belgravia has been sold at £2m, £8m and £16m, again over a 10-year period.
I believe my most memorable deal is the acquisition of the 257-bedroom Intercontinental Westminster (now the Conrad St James) on behalf of a Norwegian pension fund. It was conducted entirely off-market and relied on long established relationships.
However, I’d say that my memorable deals are not necessarily the largest - the quickest ones also stand out. In January this year, contracts were exchanged in less than one working day from the deal being agreed, with completion a week later! The fastest I’ve ever known.
Tophams Hotel, Belgravia, through the years.
3. What are the current levels of demand for London Hotels?
2020 was the quietest year for London hotel deals since 2009, and there were certainly the fewest new instructions of any year in the last 25.
Through the second half of last year we heard a lot of “I am a cash buyer and want a 20 per cent discount.” However, since the start of this year it has modified to “I am a cash buyer and what stock do you have?” Discounted deals have simply not materialised. The market remains starved of decent supply and there is a whole wall of cash out there seeking opportunities. This is a tremendous vote of confidence in the future prospects of London hotels.
4. What are your predictions for the period ahead?
It is likely we will see some consensual and distressed sales from Q2 onwards, but with so many potential buyers waiting to pounce even this might not lead to deep discounts, unless of course we have a deluge, which I believe is unlikely.
My faith in the London market has been bolstered very recently in dealing with the sale of seven small hotels and hostels in central London at individual prices all sub £10m. In the 24 working days from launch to bid deadline we had more than 30 interested parties viewing the properties resulting in more than 15 serious offers, all but two of which were 100 per cent cash.
5. What would your message be to owners thinking of selling?
There are buyers out there ready to move quickly and pay reasonably full prices, so don’t assume the market is poor right now. There is no need to be concerned about attracting unwanted attention either, if required we can deal with sales on an “off-market” basis to test market reaction and may be able to place the hotel confidentially and without the need for any marketing. Approximately 20 per cent of my deals are conducted completely “off-market” due to the contacts and experience I have in the market, and many of these remain completely secret even following completion. Generally, there is no real price differential between off-market or open marketing approach.
6. What is unique about the London hotel market?
London hotels, compared to provincial hotels, are purchased more for capital appreciation than operating returns. ROI’s in London are approximately half that of the provinces, however capital appreciation can be remarkable. In fact, I believe in any five-year period from 1996 onwards, there would always have been capital appreciation despite many setbacks including September 11, tube bombings and the Global Financial Crisis of 2008.
Those who bought in 1996, 2002, or anytime between 2010 and 2014, will have done particularly well. Even those who bought in 2019 immediately before the COVID-19 pandemic should also do alright providing they hang on in there for at least five years. Each time London bounces back it tends to go on to reach new highs, and despite the absolute hammer blow to London hotel trade this time around I don’t believe the outcome will be any different.