REPORT FROM SCOTLAND—Despite strong performance in a few key cities, the Scottish hotel industry largely limped to the finish line during 2012, according to sources.
The declines mirror the market’s freefall during September, when accounting and business advisers PKF International measured revenue declines at much steeper rates than elsewhere in the United Kingdom. Glasgow, for example, saw revenues fall 15% while traditional market leader Edinburgh experienced a 4% drop.
“This continued decline is of concern for the Scottish hospitality sector, which has already had a difficult year,” said Alastair Rae, a partner for PKF’s real estate and hospitality sector.
William Macleod, executive director of the British Hospitality Association in Scotland, said the hotel sector slump is of “real concern” amid a dampened economic outlook for the country’s economy as a whole.
“A major concern is continued capital expenditure in refurbishment and maintenance of quality in the product,” he added.
But that, as well as muted performance, were not limited to Scotland during 2012. The U.K. in general experienced largely muted results in pounds, with HotelNewsNow.com sister company STR Global tracking a year-end decrease of 1.5% in occupancy and increases of 2.9% and 1.4% in average daily rate and revenue per available room, respectively.
But whereas many hotels in England were boosted, at least temporarily, by the Olympic afterglow, Scotland suffered in the shadows of several market challenges, Macleod said.
Hotels in the country were affected by “continued pressures on household incomes and consumer spending; depressed demand for second, domestic holidays and short breaks; consumers looking for deals; and poor weather affecting leisure travel,” he said.
“Occupancy is often achieved at expense of rate,” he added.
Not all was dire during the year, analysts said. A highlight was Aberdeen, which reported increases of 6.4%, 5.4% and 12.1% in occupancy, ADR and RevPAR in local currency, according to STR Global.
“Aberdeen, for example, is one of the highest performers in the U.K.,” said Elizabeth Randall Winkle, managing director of STR Global.
And Glasgow and Edinburgh, despite ending the year either flat or with declines, both reported steady demand, with occupancy finishing the year at more than 75%.
“Glasgow is also within the top 10 of U.K. destinations, and occupancy in Edinburgh and Aberdeen are both around 80% for the year,” said Tim Smith, a director at the HVS London office.
There are some other encouraging signs for the future. The next few years will see Scotland welcome two of the world’s biggest sporting events, the 2014 Commonwealth Games in Glasgow and the Ryder Cup 2014 at Gleneagles, as well as the government’s “Second Homecoming,” a yearlong celebration that invites people with Scottish ancestry to return for a visit.
“We are forecasting RevPAR increases for Edinburgh and Glasgow for 2013,” STR Global’s Winkle said.
And some investment plans that were put on hold during the worst of the economic crisis have been resurrected.
Aurora Hotel Collection will press ahead with its $60-million investment plans for a luxury hotel at Glenbervie House, near Larbert.
Similarly, De Vere Group Village Urban Resorts is investing $32 million into a development at Glasgow's Pacific Quay, which will include 120 rooms and a health and fitness center—which will open in time for the Commonwealth Games.
Several international brands are casting confidence in the market.
“Our Scottish portfolio has played a major part in what has been a successful 2012 in the U.K. for Hilton Worldwide,” he added.
Hilton has 15 hotels across four brands in the region, and Lifschitz said that the company will expand its portfolio in Scotland in 2013 by bringing DoubleTree by Hilton brand to Dundee.
“This will become DoubleTree by Hilton’s third Scottish property, and we see significant opportunities for expanding its portfolio as a conversion proposition in the coming years,” he said.
InterContinental Hotels Group will also expand its footprint of 11 existing assets in Scotland.
“We have recently signed a Crowne Plaza Roxburghe in Edinburgh and a further Hotel Indigo in Edinburgh—the Hotel Indigo Edinburgh Princes Street, which is due to open next year,” said Gemma Bull, public relations manager, Continental Europe.
Other good news came from the skies, with Virgin Atlantic announcing it will launch 18 flights a day between Scotland and Heathrow Airport early this year. The airlift will provide the hotel industry with a much-needed boost, HVS’s Smith said.
”Travelers will have more options in flying to Scotland. Anything that can boost the accessibility of key business destinations will help the industry,” he said.
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