Christie & Co's 'Business Outlook 2024' saw signs of rebalancing across the UK hotel sector in 2023, with trading performance maintaining its upwards, albeit decelerating trajectory. Plateauing interest rates and inflation levels improved sentiment, providing the market with some much-needed stability.
Transaction volumes progressively improved from the summer onwards and resulted in a stronger second half, in line with our mid-year market predictions. In addition, the bid-ask spread between sellers seeking value for strong trading performance and buyers having to factor increased debt costs into their pricing is narrowing. This translated into a -4.1% drop in Christie & Co's hotel price index for 2023.
Christie & Co's market insights reveal there was a notable increase in hotel deals agreed between H1 and H2 2023 of over 81% which will positively impact transactional volumes during 2024. Furthermore, a progressive uptick in distressed cases has emerged and should lead to more consensual and forced sales during the course of this year.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
Continued uptick in stock levels and transactional volumes driven by a wave of refinancings and government contract withdrawals
Notable increase in distress both through consensual and forced sales which in turn, will lead to further brand consolidation through conversion brands
Plateauing of performance particularly in leisure-led destinations as household disposal income is under pressure and will drive guests towards the value-for-money accommodation offering
Further polarisation of the market towards economy and luxury segments with a squeezed midscale segment
Yields softening to reflect stabilising yet high interest rate environment and pricing finally adjusting
Development pipeline still at risk in key markets due to increased debt and construction costs
Carine Bonnejean, Managing Director of Hotels at Christie & Co said: “We saw a notable increase in deals agreed during the second half of the year as well as an uprise in distressed cases which will boost investment volumes during the course of 2024. Activity has already picked up during the first few days of this year with a call to action from owners and lenders in particular.”