Colliers: One in four hotel sales distressed

Research by Colliers International Hotels found that 26% of UK hotel sales last year were distressed transactions.

Colliers said the vast majority of deals involved new entrants to the market or expansion by existing hoteliers.

Distressed sales are forced transactions after companies or government entities are either already in default, under bankruptcy protection, or in distress and heading toward such a condition.

The research analysed buyer and seller sentiment and found that one in four hotels were sold by owners in a position of distress, with 26% of deals emanating from administration or receivership.

Julian Troup, head of Colliers International Hotels, said: "Despite these challenging times, we're encouraged by the increase in the number of new buyers who saw the opportunity to invest in the hotel market after taking a long-term view on an improvement in real estate and recognising the immediacy of trading gains under their ownership.

"Although there continues to be sellers that have to dispose of properties for financial or health reasons, this was surpassed by those who made the decision to sell for reasons such as retirement, or a change of occupation.

The hotels team at the North West office of Colliers International in Manchester sold 26 hotels in 2012 with a combined value in excess of £29m and 31% of those property sales were distressed transactions, an increase from 17% in the previous year.

Some 78% of sales in the North West were to first time operators compared to 72% in the previous year, a rise attributed by Colliers International to the entrepreneurial spirit of purchasers being supported by more bank funding being available.

Neil Thomson, associate director of hotels at the North West office of Colliers International, said: "The figure for distressed transactions in 2012 represents the fact that we have successfully secured more instructions from banks and administrators as opposed to reflecting any marked rise in the number of such sales in the North West region."

Thomson said the hotel sector was a major player in the UK economy, being the sixth largest employer and generating £115bn annually for the economy.

Colliers International Hotels research also revealed that 34% of buyers were new entrants to the hotel market.

Most of the remaining purchasers were existing hoteliers growing their portfolios or selling one hotel to acquire another, or corporate buyers or sellers where the buyer planned a change of direction in terms of the trading position.

In a forecast for the year ahead, Troup added: "2013 will be similar to 2012 in terms of the level of activity and prices achieved. There are still buyers out there with cash or those supported by bank funding."

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