Surging worldwide hotel prices could favor buy to let

3rd April 2007

A new survey from hotels.com, part of Expedia, found that hotel prices around the world rose by an average of 15% during the fourth quarter of 2006 compared with the same period in 2005. The website found that the cost of staying at a hotel in the UK rose by 17% to £98 per night in the last quarter of 2006, compared with the same period in the previous year. Bath was the most expensive place to stay in the UK, however; with average room prices up 6% to £114 (with London following close behind with an average of £107, and a 22% rise).

The most expensive continental European city was Rome at £94 per night, followed by Copenhagen and Amsterdam (both averaging £93 per room). Tariffs rose by 11% in the USA and 12% in Asia, while the biggest price rise (58%) was in Bangkok (although the average cost of a stay was £44 during the fourth quarter).

The highest cost per room was in Moscow, with an average of £172 per night, followed by New York and Dubai - averaging £155 per night and £124 per night respectively. New York was the most expensive hotel for a luxury stay during the fourth quarter, with prices averaging at £343 (compared with £225 in London).

At the more affordable end, Shanghai and Bali boast room prices of just £61 and £63 per night respectively.

Rising yields lure investors
Hotel investment levels in Europe reached €21.6 billion in 2006, up 37.9% on 2005 and more than doubling the deal volume of 2004, according to a report from Jones Lang LaSalle Hotels. This is attracting a wider international profile of investor.

“Europe boasts the most international profile of investors with almost half of the total investment coming from outside the continent: 26% global sources, 10% Middle Eastern, 9% from the US and 3% from Asia,” said Mark Wynne-Smith, CEO Europe, JLL Hotels. He added that investors are already starting to look at Poland, Bulgaria, Slovakia and Serbia; and predicted that interest in CEE would grow as the market stabilizes this year. The market is set to stabilise this year and interest in the more traditional Western European cities may transfer to Central and Eastern Europe.”

While the hotel investment market is growing, stimulated by a more competitive mortgage market and options like condo-hotel becoming more popular, rising costs could encourage more tourists to consider buy to let apartments and villas. With travel agents like Thomson, WorldChoice and TravelCare already working with big agents and developers as introducers, and many smaller property and travel firms linking up, tourists are now being directed toward property owned by UK investors.

Source: Overseas Property Professional