The Scottish hotel market has seen a surge in investment volumes in 2023, experiencing a threefold increase compared to the previous year, according to Savills. The volume of transactions reached £165m in the first half of the year, a significant leap from last year’s £54m.
The report highlighted a growing interest in Scotland’s independent boutique hotel with transactions hitting £71m in the first half of 2023, comprising 43% of all deals made during the year to date. This is in stark contrast to last year when transaction volumes for all hotels only reached £54m in the same timeframe.
A key factor contributing to this growth was the sale of seven premier boutique hotels in Ballater, Glencoe, Inverurie, Oban, the Isle of Mull, Inveraray, and Nairn. These were sold for £45m by funds overseen by Blantyre Capital and its operational partner Fairtree Hotel Investments.
Another major contribution to the surge in investment volumes was the sale of Waldorf Astoria Edinburgh, also known as The Caledonian. This sale accounted for over half (51%) of the total figure. Savills highlighted this growth amidst a 60% year-on-year slump in the wider UK hotel sector, demonstrating the resilience of the Scottish market.
Steven Fyfe, the director of hotel capital markets at Savills Scotland, explained the attractiveness of boutique hotels for both consumers and investors. “Boutique hotels offer the experience and impartiality we have all craved, especially since the pandemic’s onset in 2020. This increasingly popular sub-market provides plenty of differentiation,” Fyfe said.
Fyfe also noted the promising trend for the industry as RevPAR (Revenue Per Available Room) growth outpaced inflation, contrary to general assumptions that they correlate closely. He said that “it’s interesting to note that RevPAR growth is outpacing inflation, despite the assumption the two are closely correlated. The ongoing trend for staycations has seen Scotland become an increasingly popular holiday destination, therefore we expect figures to remain largely positive in the second half of the year.”
However, he also tempered expectations of a continued increase in transaction volumes due to ongoing economic uncertainties.