Another active year for Scottish hotels despite continued Brexit uncertainty

Martin Gill

BDO’s Hotel Britain report, which analyses the performance of UK hotels, reveals the sector experienced another year of positive results in 2018 despite the uncertainty around Brexit, a decrease in visitor numbers to the UK and slower economic growth.

Room yield growth in Scotland dropped by -6.3 per cent compared to Wales (0.7 per cent), England (0.5 per cent) and Northern Ireland (-6.4 per cent).

This is due to the increase in supply affecting occupancy rates as some 1,689 rooms opened across Edinburgh and Glasgow in 2018.  The pipeline looks set to continue at similar levels in 2019.

Edinburgh has the highest occupancy rate of any Scottish city at 83.1 per cent, which was the third highest occupancy rate outside of London benefiting from continued strong leisure and corporate demand.

However, this was a drop on last year of -2.5 per cent when Edinburgh achieved the highest occupancy of all UK cities, including London, as well as principal European capitals. The occupancy rate for Glasgow also decreased slightly by -0.5 per cent to 82.8 per cent.

Aberdeen saw occupancy rates rise by 6 per cent to 67.2 per cent reversing a four-year downward trend as oil prices recovered. However, in CAGR terms, it is still the poorest performing destination at -6.6 per cent.

UK-wide, overseas visitor numbers decreased for the first time in eight years following a record-breaking year in 2017. However, passenger numbers at Edinburgh airport were up by 6.7 per cent, the highest increase amongst the principal regional airports across the UK whilst Glasgow airport saw a reduction of -2.0 per cent.

However, visitor numbers are expected to rise next year with VisitBritain predicting that an additional 1 million people with visit the UK in 2019. BDO says this will be a welcome boost against a backdrop of political uncertainty.

Martin Gill, partner and head of BDO in Scotland, said: “2018 has been another strong year for hotels in Scotland. Glasgow was the top performer whilst Aberdeen is showing signs of improved levels of activity.

“The Scottish hotels market has seen a boom in recent years with a lot of investment activity which has resulted in a number of new hotels. The large increase in supply has satisfied that increasing demand but there is still a lot of room for potential growth. Looking ahead, Scotland has an active pipeline with well over 1,600 hotel rooms expected to open during 2019. The strong performance demonstrates the industry’s robustness despite facing continued EU uncertainty and an increase in supply.

“While the government’s focus is on the UK’s economic future, hotel brands and owners have a number of competing priorities on their agenda, most notably investing in the right technology, managing a EU-heavy workforce and overcoming competition from online platforms.”

Mr Gill addded: “With international visitor numbers forecast to increase in 2019, together with a reduced pipeline of new hotels, I do not foresee any major shocks for the sector. Inevitably there will be challenges ahead but I’m confident the Scottish hotel industry will continue to experience growth over the next 12 months and investor appetite will remain strong.”