The UK hotel investment market has experienced a large amount of growth over the past few months cemented by the fact that £2.3b worth of transactions were completed over the last half of 2011. The data comes from the Q1 reports for 2012 by the Jones Lang LaSalle group.
It seems that hotels are becoming an interesting investment for investment funds and private investors due to the fact that hotels offer secure income that is low risk. In addition, they are usually thought of as a hands-off investment as they do not need much management and all needs are taken care of by a separate hotel operator.
Property Consultant for Knight Knox International, Joe Daniels, stated that hotels are the perfect investment for anyone that is looking for an investment that will last long term. He added that investors do not have to worry about taking care of the property unlike a buy to let property and in addition will get a much higher rental income from the hotel making it the profitable choice. In addition, he stated that their company has some great hotel offerings because their interest rates are set at 0% upfront.
According to the IPD Pan-European Hotel Performance Report, the UK average total year on year returns for hotel investments sits at about 10.4% which is almost three percent more than any other area in the UK.
The other reason that hotel investments are popular is due to the fact that they have a built-in solid exit strategy. Most of the time when exiting the investment there is a ten percent net yield assurance. This is due to the fact that there are other savvy investors that will want to get their hands on a profitable hotel chain.