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Hospitality property values plummet
The slowdown in the economy saw average hotel property values fall by 18 per cent during 2008 – a decline steeper than the one experienced in the housing market.
According to property agent Christe + Co, the general lack of confidence in the banking sector hampered the funding of deals, while the challenging market conditions brought a "more realistic" approach to asset prices.
In its Business Outlook 2009, Christie + Co said that the end of the year brought the first signs that the economic slowdown and the subsequent drop in trading would leave some companies struggling to stay afloat.
The company also predicts that trading in both the leisure and corporate segments will continue to come under pressure during the next year as discretionary and business spending tightens, leading to increasing numbers of hotel packages being broken up and brought to the market in smaller groups, or as single assets.
Jeremy Hill, head of hotels at Christie + Co, said: “2009 will be another challenging year for the hotel sector and some operators will undoubtedly fare better than others.
"Those companies with low gearing, a strong brand and a sustainable operating model, will be able to trade through the challenging times, and will also be in the best position to increase market share by taking advantage of quality opportunities at reduced prices.”
The value of restaurant and pub properties also fell during 2008, although at a slightly slower rate.
The average price of a restaurant fell by 14.9 per cent compared with the previous year while the pub sector saw 11.6 per cent shaved off the price of properties.
However, David Rugg, chair of Christie + Co, said there were still investors looking to take advantage of the falling prices, which meant that transactions were still being made.
“We are still seeing a consistent volume of buyers registering on our website and viewing businesses," he said.
"In fact we arranged more viewings by more viewers in 2008 as against 2007. The number of businesses for sale is stable and constant. It is the lack of cash, and with it a lack of certainty, that has slowed the market confidence of both buyer and seller."
Rugg added that the challenge in 2009 would be matching vendor expectations with those of funded buyers.