The first quarter of 2018 saw UK hotel investment volumes reach €1.85 bn, a surge of 81% year-on-year, continuing the trend evident over the last 12 months, according to global real estate advisor CBRE.
Despite continued high investor demand, overall European hotel investment volumes slowed over the quarter to €4.02 bn, representing a 9% decrease compared to Q1 2017.
'Whilst a shortage of stock has caused a slowdown in overall European hotel deal activity, continued investor demand is generally holding hotel yields at a three-year low,' said Kristen Kozlowski, senior director, CBRE Hotels.
'Notwithstanding the impact of the future interest rates rises, appetite in the fixed-income and long-leased space in the UK and Germany could compress yields further in the short-term and is fuelling investment in secondary markets.'
Growth in the UK was driven by several significant nationwide hotel portfolio deals in Q1 2018, including the £135 mln (€154 mln) sale of seven hotels to US-based Starwood Capital Group and the sale of the Grove London Travelodge portfolio for £72.3 mln (€82.3 mln).
In addition to the UK, Ireland, Italy and the Netherlands all saw an uptick in Q1 2018.
Some €241 mln was invested into hotels in Italy, representing a 198% increase year-on-year. The Netherlands saw hotel investment volumes reach €187 mln, mainly due to significant single asset sales such as The Hague Marriott Hotel and Hilton Rotterdam.
Ireland also saw four deals transacted in Q1 totalling €190 mln, almost half the volume of spend recorded in the sector in 2017.