Is 2024 a good time in London for Property Investment in the Hospitality Real Estate Sector?

London has always been a beacon for property investors. Its appeal of resilience, stability, opportunity and culture support that. Its proven track record of performance and environment predictability is what investors are opting to stick with, especially in today’s market landscape. However, is now a good time in London for property investment in the hospitality real estate sector?

The Current Landscape of Hotel Property Investment in London

UK hotel transactions have come to an estimated ￡3.08 billion only in the first half of 2024, 35% higher compared to full year 2023 figures, according to Savills. This increase can be seen as a turning point for hotel activity and investor confidence. Large portfolio acquisitions surpassing line highlights feed into the hospitality sector, diminishing uncertainty produced by rising debt costs in 2022 and 2023. The return in investor confidence in hotel property investment has been evident this year as Starwood Capital acquired 10 Radisson Blu hotels from the Edwardian Group, strengthening the investor’s presence in the European hotel market. Additional deals taken this year include Ares Management Corp acquiring 21 hotels and Blackstone acquiring the Village Hotel platform from KSL Capital Partners. The rise of interest rates in 2023 hindered investors’ ability to pay high asking prices, but as rates stabilized, investor confidence returned with €1bn of hotel assets being transacted this year, according to Savills.?? ??????

Impact of Tourism in London on the Hospitality Real Estate Sector

London traditionally holds a great reputation as the destination for amazing entertainment, events, and business ventures for tourists who wish to have a great time. According to CBRE Hotels 2024 report, they proposed that the UK is a great destination for tourism, most especially in 2024 as the UK pound is weakening. Based on the LSEG Statistics, the sterling since Brexit at 1.5% has reduced to 1.3% in 2024, which could create negative benefits for the UK in terms of export and import of goods.

However, as a result of the UK weakening pound, tourism has significantly increased in the UK most especially in the Hotel sector, PwC UK reported that the hotel occupancy rates in London is at 78.9% and 74% in the UK as of March. Higher tourism demands for hotels either as a result of UK holidays being cheaper poses huge benefits for Real Estate Hospitality businesses and their investors, because an increase in hotel occupancy will lead to higher profits, which will consequently lead to high dividend rates for property and hotel investors in London and the UK.

The General Election Impact on the UK Rules and Regulations for businesses In the Hospitality Sector

As of the 5th Of July 2024, The UK general elections concluded with the Labour Party now in current power/control over the UK. The question that will be answered is how the Labour parties manifesto will benefit investors in the Real Estate Hospitality sector? The Labour party attempts to encourage investors to invest by proposing to cap the corporation tax rates in the UK by 25% which means that Real Estate hospitality businesses will be able to still have a large amount of their profit even after being taxed by the government. This consequently suggests that large profits remained after taxed from tourism or high hotel occupancy rates will lead to higher dividend rates being offered to investors, creating a stable and trustworthy relationship between the investors and real? hospitality businesses, thus a stable and confident market for the real estate industry will occur.?

Conclusion

London still continues to remain a significant location for property investors to expand their hospitality presence as the city’s resilience to market turbulence carries on. Investor confidence within the hospitality sector has increased as interest rates stabilize and more notable deals take place. Tourism within the UK, especially London aids the demand for hotels as reported by PwC statistical report, hotel occupancy of 78.9% will benefit the dividend investors acquire. The Labour Party has promised to cap corporation tax in the UK by 25% enabling Real Estate Hospitality businesses to have a large amount of their profit, despite taxes from the government on top of that. Now is still a good time for property investment in the London Hospitality Real Estate Sector as the market remains stable, lucrative, and competitive.