Hospitality Matters

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Welcome to the latest edition of Hospitality Matters, our regular bulletin for the hotels industry. We are now in the final stretch of 2014, a year that has seen the hotel M&A market continue to remain strong in the UK, with a large number of transactions completing to date and many more in process to be completed by the end of the year. Our own merger with Dundas & Wilson has completed its integration stage and our hotels group is already benefitting from our combined strength across the United Kingdom.

As with the last two or three years, many of the hotel transactions have been driven by the continued restructuring of the bad debts arising during the recession, including several disposals by banks who had previously taken assets onto balance sheets during the depth of the recession and now disposing of them as values return closer to pre-recession levels. There have also been a number of non-performing loan (NPL) portfolio disposals in the last 12 months, secured over what can often be a rather mixed bag of hotel assets. But these have nonetheless been very competitive sale processes with large numbers of bidders. Some quite substantial chains such as QHotels and the Hotel Collection (formerly Puma Hotels) have changed hands this way.

But as the banks come towards the end of their programme of disposals of NPLs and hotel assets from their balance sheets, often at surprisingly high prices, we have begun to see more traditional investors take advantage of recent price hikes to crystallise some profits in those assets which have not been the subject of distress or which have been acquired since the start of the recession. As the market in the UK continues to remain strong and debt fi nuancing more readily available at competitive pricing, we can see a pipeline of assets coming to market from willing sellers.

In the rest of Europe, the hotels market seems to be slightly further back in the value recovery curve and we have not yet seen quite the increases in value we have seen in the UK. There continues to be a large amount of distressed assets and NPLs to come to market, particularly in Southern Europe and we expect this market to be driving liquidity, with large amounts of capital, coming particularly from the US, chasing acquisitions there at distressed pricing levels.