Hotel sector is one to watch for business sales

July 5th, 2012 by Chris St Cartmail

People looking for businesses for sale could do well to keep a close eye on the hotel sector as the industry is expected to experience further consolidation in the coming months.

Reports suggest that three and four-star properties are most likely to undergo turmoil as lenders look to move into the next stage of action regarding over-geared groups. We've already seen the beginnings of this with the De Vere Group selling its non-core businesses and revamping its Village Hotels chain in advance of a potential business sale further down the line.

The Principal-Hayley group has also been put up for sale with a price tag of £500 million. It is thought likely that a private equity group will seek to acquire the hotel chain in order to use it as a consolidation vehicle.

Q Hotels is also putting some of its smaller hotels on the market as it considers refinancing in the near future, while the heavily-indebted Jury's Inns is set to be sold to a private equity banker.

Russell Kett, chairman of HVS London, global hotel valuation and consultation business, explained that there is likely to be yet more businesses for sale in the hotel sector in the near future. “The banks are now confident enough in the market to consider a sale likely, and are putting groups on the market that other operators and investors are likely to looks at,” he added.

The sector is undeniably tricky to operate in at the moment. Pressed for cash, many customers are looking to trade down, either overcrowding the middle sector or skipping it out all together in the search for a bargain.

While these pressures are undeniable, they are making for an exciting and competitive market for those that have the means to gain a place in the hotel market. Mr Kett concluded by warning investors that the investment and the time required to make some significant gains in the sector are “significant” and urged buyers to accept that they will need to extend their horizons if they want to get involved.