International interest in hotels shows no sign of checking-out in 2017

Published: 11 January 2017

This article was published on the City A.M. website on 11 January 2017 as part of Invest Edinburgh Talk.

As the UK’s most popular tourist destination after London, Edinburgh plays a vital role in the UK tourism economy. Its preeminent position was underlined recently when Deloitte – for a third year running – named Scotland’s capital the UK’s most attractive location for hotel investment outside London.

The figures certainly stack-up. The city achieves some of the highest hotel occupancy levels in Europe and some of the highest average daily room rates in the UK. Fuelled by a visitor economy that benefits from a year-round festival economy generating in excess of £280m for the region every year, Edinburgh now out-performs many larger competitor cities, such as Rome and Lisbon.

According to market research, 47 per cent of respondents named Edinburgh as the most attractive UK hotel investment destination outside London. The survey of more than 100 industry leaders also found that Chinese and North American investors are expected to dominate the European hotel investment market in 2017.

“Investors from China and North America are likely to capitalise on the weakness of sterling,” said Nikola Reid, Director in Deloitte’s Hospitality Advisory team.

“Despite initial uncertainty in the immediate aftermath of the Brexit vote, we have recently seen a rejuvenation of interest from foreign capital, driven by their appetite for income and the opportunity to capitalise on sterling’s depreciation. As well as expectations for Asian capital to dominate activity, industry leaders have also highlighted domestic investment as a key driver of regional deal flow in 2017.”

New openings

In Edinburgh, new openings in 2016 included the first Hub by Premier Inn outside of London and the addition of 146 contemporary apartments in the heart of Old Town with the Adagio Aparthotel. The newest addition to the Scottish capital, the 240-bedroom Courtyard by Marriott® Edinburgh, welcomed its first guests on 28 December.

That confidence remains. Edinburgh has witnessed a number of significant investments by overseas investors in the past 18 months, as well as a number of announcements for future development plans.

In late 2015 Qatar Airways acquired the former Novotel Edinburgh Park, whilst in 2016, Leonardo Hotels, the European division of Israel-based Fattal Hotels Group, made its first move into the Edinburgh market, with only their second UK hotel. Elsewhere, US based Starwood Capital re-launched the former George Hotel as The Principal Edinburgh following a multi-million pound renovation and the four-star Crowne Plaza Edinburgh – Royal Terrace was sold to an unnamed high net worth investor.

Promising pipeline

Looking ahead, work began in late 2016 on a number of new large-scale hotel developments, including breaking ground on tHe Haymarket, which will offer a 168-bed apart-hotel and a 190-bed hotel once complete. Netherlands-based Carlton Hotel Collection announced its first venture into Edinburgh with a four-star site in the city centre and luxury brand W Hotels also announced that it will open its first UK hotel outside of London in the new Edinburgh St James development. These exciting developments complement hotel opportunities progressing elsewhere including India Quay, Fountainbridge, Victoria Street and King’s Stables Road.

With record passenger numbers at Edinburgh Airport, Marriott announced its intention to launch its Moxy brand in Edinburgh with a new 230-bed hotel, while Hampton by Hilton has secured planning permission for a new 175-bed facility to support the airport’s growth. In addition, following a £2.5m investment programme, Hilton Worldwide has re-branded its Edinburgh Airport property under the group’s Doubletree offering.

It’s clear from this snapshot of activity that international investors continue to recognise the opportunities that exist – this sector continues to set new records and punch well above its weight in terms of scale.

European heavyweight

Figures from LJ Research in late 2016 revealed that the average hotel room rate (ARR) in Edinburgh hit £181.96 in October, the highest figure on record. That exceptional performance reinforced earlier results recorded throughout the year.

In September, Edinburgh hotels enjoyed an impressive 94 per cent occupancy rate, highlighting strong demand for accommodation, despite new additions to the city's hotel stock. Occupancy was up 2.4 per cent on the same period in 2015 and the highest on record since LJ Research began tracking hotel performance across Scotland ten years ago.

Looking ahead, PwC, in its annual 2016/17 Hotels Forecast, predicts Edinburgh will enjoy the second highest hotel occupancy rates in Europe in 2017.

The city’s enduring reputation as one of Europe’s top tourism destinations continues to be complemented by a multitude of independent awards, including being named one of the world’s most reputable and sustainable cities. In 2016, Scotland’s capital was voted UK entrepreneurial city of the year, the UK’s greenest city and best European city for technology firms to locate to. With those kinds of accolades, it’s clear that the city’s hotel sector has a firm foundation for sustainable growth, built on far more than an enviable visitor economy.


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