Local councils spend record number on hotels

Local councils in Britain have spent record amounts on buying hotels, spending £93m in 2018, an increase of 182% on 2017’s £33m.

This demonstrates the increasing appetite for local authorities to capitalise on low-interest central government loans to purchase commercial property to fund major projects or stimulate regeneration, according to the latest research by global property adviser Knight Frank.

Examples include the acquisition of the 212-bedroom Croydon Park hotel (pictured) in London by the London Borough of Croydon for £29.8m last year; and Scarborough Borough Council snapped up the 140-bedroom Travelodge St Nicholas in Scarborough in October 2018 for £14m.

Shaun Roy, head of hotels at Knight Frank, said: “With the growing acceptance that councils need to seek new means of funding to cover budget shortfalls, we have seen many local authorities make the intelligent move of investing in hotels.

“Significant opportunity exists for councils to invest in hotels and we expect this trend to continue until 2021 when this method of borrowing will end due to new government legislation.”

Knight Frank’s research reveals over £600m of investment is already planned up until 2023 through private-public partnership schemes, where hotels form the primary focus in a development project and which have either outline or detailed planning permission granted.

Where hotels form part of a larger mixed-use scheme and are secondary to other larger publicly residential or commercial elements, the value of projects with detailed plans either granted or submitted rises to £1.8b.

Examples include the City of Liverpool, which has brought to market a number of mixed-use development schemes including the development of the Titanic hotel in 2014, the opening of a new exhibition centre and four-star Pullman hotel in 2016 and the 2018 opening of the 101-bedroom, Premier Inn in central Liverpool as part of a £39m mixed-use regeneration project.

Similarly, Dundee City Council recently opened the 120-bedroom Sleeperz hotel under a lease agreement, which forms part of a £28.5m redevelopment of Dundee Railway Station. A second development in the city, subject to planning, is expected to deliver a proposed 150-bedroom AC Hotel by Marriott, where Dundee City Council is understood to retain full ownership upon the hotel’s completion.