In among the distinct lack of April showers came the sunshine news that Scottish hotels outperformed the rest of the UK in 2017, and there are plenty more reasons for Scottish hoteliers to be optimistic in 2018 other than the sunnier climate, according to the latest research findings that we’ve rounded up in this Hotel Scotland special report.
The latest data from the Expedia Group says that Scottish hoteliers enjoyed an early summer boom in business, with a significant increase in hotel demand compared to 2017. The boom comes on the back of a positive start to the year thanks to a significant rise in hotel demand by both domestic and international visitors – fuelled by a number of fast-growing markets.
The findings, drawn from Q2 2018 data (April, May, June), show that demand for Scottish hotels increased, with a number of cities and regions across the country seeing strong year-onyear growth. Demand in Scotland overall also increased for this quarter, compared with the same period last year. Inverness and Edinburgh both saw increases in demand, while Glasgow and Aberdeen also experienced a substantial boom each growing 15% year on year. The data showed that over 50% of demand for UK hotels during the period came from UK-based guests who chose to enjoy a staycation rather than travel abroad. Hoteliers also continued to see positive growth from international travellers. Demand remains on the rise in traditionally strong visitor markets such as the US (+almost 50% year on year) and Australia (+ over 45% year on year). Package demand to Scotland also grew strongly across a number of visitor markets, encouraging a rise in average daily rates (ADR) for these types of bookings, as well as a typically longer booking window and longer length of stay. Edinburgh and Aberdeen both saw year on year growth in package demand, with Edinburgh also ranking second in the UK overall for package share of the market topped only by London.
Then we come to research by Savills. It has highlighted that investment into Scottish hotels in the first half of 2018 reached £389.67 million, doubling the total annual investment volumes recorded in 2017 (£195 million). Investment was spread across 10 individual transactions and components of seven portfolios. Savills says the 10 individual sales that occurred in Scotland were principally focused in the £1-10million price bracket, with the Caledonian Waldorf Astoria Hotel in Edinburgh being the only transaction above this bracket, achieving a sale price of £85 million. UK buyers were the biggest buying group, accounting for 41% of activity, followed by Middle Eastern investors (22% of transactional volume), Israeli investors (16%), US investors (8%), Canadian Investors (7%), Singaporean investors (5%) and German investors (1%). Collectively non-domestic investors continue to be the dominant player in the market.
Steven Fyfe, associate director in the hotels team at Savills in Glasgow, said of the findings, “Investment volumes continue to build on the strong level of appetite we witnessed last year as we find ourselves already surpassing last year’s total annual volume at the half year point. The spotlight is still firmly fixed on Scotland for hotel operators and investors. Existing brands are looking to increase their representation in the country and new entrants are seeking to secure a foothold in the market.”
Looking at the UK as a whole, Savills research shows a total of £3.2 billion has been invested into hotels in the first six months of the year, with Scotland accounting for 13% of investment in terms of value. Meanwhile, GlobalData research says that Scottish destinations are faring particularly well as demand to the whole of the UK is fuelled by visitors from several fast-growing markets such as Argentina, China and Ireland who all featured triple digit year on year increases. The number of Chinese visitors flocking to Scotland has soared by almost 200 per cent in a decade, and with the recently announced direct flights to China from Edinburgh, links with the country are set to strengthen even further.
Finally, analysis by Knight Frank found that prices in Edinburgh are growing at three times the speed of the UK’s, and revenue per available room is significantly ahead of the national average. A 37 per cent rise in new-build hotels is contributing to a significant boost in the sector. The same research found that, of the UK cities presenting the best prospects for hotel investment and development, Inverness, Brighton, Edinburgh, Cardiff and Liverpool were the UK’s top five most attractive cities. Knight Frank’s report also discovered that it’s the budget hotel sector that continues to dominate the market, representing 69 per cent of all new-build hotel stock and 65 per cent of all hotel extensions, with around 8,300 new branded budget hotel rooms planned to open in the UK this year.
by Jason Caddy