The hotel sector in Glasgow is growing faster than in any other city in the UK, with the average cost for an overnight stay in Scotland’s largest city climbing 7.5% in the first half of 2018 with occupancy rates increasing to 79.1%.
PwC’s latest Hotels Forecast report shows that the average daily rate (ADR) in Glasgow climbed to £73.41 from £68.31, while the key revenue per available room (RevPAR) benchmark was +8.2% to £58.08 – eight times the pace of growth in the UK overall.
In contrast, both the occupancy rate and revenue generated per available room in Edinburgh have fallen, though the Scottish capital remains the most expensive city outside of London in which to stay overnight.
RevPAR, which is calculated by multiplying the average achieved room rate by the average annual room occupancy rate, in Edinburgh fell 1.6% to £73.68, as occupancy dropped by 2.1% to 78.4%. In spite of this the costs of staying overnight in the city increased by 0.5% to £93.92 – second only to the average daily rate in London of £141.16.
In Aberdeen, the ongoing recovery in the oil and gas sector led helped RevPAR grow 4.7% to £35.85 but while occupancy rates increased by 4.7% they remain low, at just 63.5%.
Liz Hall head of hospitality and leisure research at PwC, said:
“Glasgow’s reinvention as a modern city with international appeal for both tourists and businesses continues, with the city’s hotels showing an impressive performance, driven by the 7.5% increase in average daily rate as more four-star hotels open.
“The performance of Glasgow’s hotels sector highlights the extent to which the city is now seen as a major tourist attraction with the number of international visitors increasing by a fifth to 787,000 in 2017.”
“In Edinburgh, RevPAR remains the second highest of all UK cities, but this and occupancy rate have slipped probably as a result of new room supply and also competition from the home share market and serviced apartments.
“With more than two million visitors in 2017 and record numbers attending the Fringe and International Festival, there is little room for occupancy rates to go much higher in the city, and with ADR increasing, albeit moderately, Edinburgh remains well-placed”.
In the first half of 2018 there was almost £400 million investment in hotels in Scotland, more than doubling the 2017 total in six months. The largest deal was the £85m sale of the Caledonian Hotel to Abu Dhabi-based Twenty14 Holdings.
And there is no sign of a slowdown in the number of new hotels opening in Scotland’s major cities. In Edinburgh new openings include the Courtyard Edinburgh while many major names such as The Balmoral, have seen increased investment. And at the more novel end of the scale, a floating hotel named The Fingal is set to open in the autumn.
In Glasgow, new openings by Radisson Red, Motel One, Ibis Style and Marriot’s Moxy Hotel on High Street have increased available rooms, while in both the International Financial Services District and nearby the Scottish Exhibition Centre, further developments are underway.
In Aberdeen, the opening of the Sandman Signature Aberdeen Hotel in in the former Robert Gordon University St Andrews Street campus indicates the increased confidence in the city.
On a UK level, RevPAR increased by 1% to £67.63. The average occupancy rate on a UK level climbed by a modest 0.3% to 82.9% as the average daily rate grew 0.8% to £89.98.
PwC’s forecasts hotel trading growth overall to flatten in the year ahead due to economic uncertainty, weak business travel demand and an influx of new rooms scheduled to open across the country.
Liz Hall, added:
“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.
“Following a number of years of strong revenue growth when there was not the imperative to focus on costs, prudent operators and owners need to adopt a stringent approach to operating costs growth in 2019 to preserve profitability.