THE total value of hotel deals soared to nearly £200 million in Scotland last year, as overseas investors took advantage of the weak pound to acquire prime assets at competitive prices.
Investment in Scottish hotels hit £195m over 23 deals in 2017, up 60 per cent on the value of transactions in 2016, new figures show. It means 2017 was the biggest year for hotel transactions in Scotland since 2015, when the £150m disposal of Gleneagles and major portfolio sales lifted the deal total to more than £400m.
Deals to acquire well-heeled Edinburgh hotels such as The Scotsman and The Bonham helped the capital to generate £117m of hotel sales in 2017.
READ MORE: Revealed: New owner of Edinburgh's Caley hotel plans more deals
And the trend has continued into the early days of 2018, with the famous Caledonian hotel in Edinburgh changing hands for £85m this week. The “Caley” was acquired by Abu Dhabi-based investment firm Twenty14 Holdings, which declared it was on the lookout for more deals in Scotland as it looks to capitalise on sterling’s continuing weakness.
Hotel sales in Edinburgh accounted for 64 per cent of the deal value in Scotland last year, with the city second only to London and Manchester in terms of hotel investment volumes in the UK. The volume of hotel deals in Edinburgh was up 58 per cent on 2016, according to research from property firm Savills yesterday.
Underlining the growth of overseas investment in the UK since the Brexit vote, which precipitated a dramatic plunge in the value of the pound, the level of investment by international buyers was seven times greater in 2017 than transacted the year before, at £57.4m.
According to Savills, US investors drove most of the hotel investment from overseas last year, followed by finance from Singapore, India and Hong Kong.
READ MORE: Hotel in Glasgow on former power station site is up for sale
Among landmark deals carried out in Scotland last year were the sale of boutique hotel The Bonham in Edinburgh, which was offloaded by Starwood Capital to a US investment firm led by fund manager Richard H Driehaus.
However, Savills emphasised that domestic buyers were active in the market last year and continue to be in the early part of 2018. The Scotsman Hotel was acquired in 2017 by Stefan King’s Glasgow-based G1 Group, while Steven Fyfe, an associate in Savills’ hotel team, said domestic players were among the bidders for two unnamed hotels the firm has just sold.
“They [domestic buyers] are still active, but [as] you will have seen with the Caledonian in Edinburgh, that was an overseas investor looking for a trophy asset,” Mr Fyfe said. That [overseas investment] was a recurring theme throughout 2017.
He added that, while activity was focused last year on Edinburgh, where Savills advised on the sale of the Courtyard by Marriott, the market was buoyant across Scotland. Investment in Glasgow more than doubled, rising to £35.8m from £16.8m, with deals including the £33.3m sale of the Premier Inn St Enoch Square.
READ MORE: Revealed: New owner of Edinburgh's Caley hotel plans more deals
Dundee and Aberdeen saw “encouraging” increases in investment year on year to £5.5m and £5.7m, Savills said.
Mr Fyfe said: “There has been no let up from the strong finish last year to the beginning of 2018, which is obviously a positive story for the Scotland hotel market.”
Savills reported there were 219 deals in the UK hotel market last year with a total value of £5.4 billion, 32 per cent higher than the year before.
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