From its cosmopolitan cities and high-tech attractions to its history-drenched landscape and rugged beauty, Scotland and its remote highlands and islands stand out as a tourist destination. As the country readies itself for an outstanding year for tourism – which includes the 2014 Commonwealth Games in Glasgow, the year-long Homecoming 2014 series of coordinated events and the Ryder Cup at Gleneagles – its hotel industry is positioning itself to capitalise on the long-term opportunities that 12 months in the global spotlight will bring.
Scotland benefits from a strong image internationally, which has helped sell tourist propositions ranging from the historic and cultural to the extreme and outdoors. Its capital, Edinburgh, is famous for its Hogmanay new year celebrations and its arts festival. Just a short drive away is Glasgow, Scotland’s biggest city, and a leading conference, event and short-break destination, whose profile will be further boosted when it hosts the Commonwealth Games later this year.
Outside the big two
Further north, in Aberdeen, a city known as the energy capital of Europe, the focus is primarily on its business visitors. It was the top performing market in the UK outside of London in 2012, achieving a 13.7% year on year increase in revenue per available room, according to hotel analyst HotStats. As the city’s status as a leading global business centre has grown, hotel occupancy rates have enjoyed a corresponding increase, from 72.7% in 2011 to 77.4% in 2012, according to hotel data monitor STR Global.
The highland capital of Inverness is the UK’s fastest growing city, and it has seen its business tourism grow in recent years. Over in Stirling – which sits just north of Glasgow and Edinburgh – a growing leisure and business tourism market is opening up. And in Dundee on the east coast, there is a good mix of business and leisure tourism, driven by the city’s position as a hub for the life sciences and creative industries.
The reputation of the Shetland Islands north of the Scottish mainland has grown since the Lonely Planet travel guide cited it as one of the world’s top 10 tourist regions. The Isle of Skye in the Inner Hebrides island group has been voted one of the top island holiday spots in Europe, coming eighth in Condé Nast Traveller magazine’s Readers’ Choice Awards in the European Islands category. In addition to this, National Geographic magazine has named the Scottish Highlands as one of the top 20 holiday locations in the world.
“The strong markets in Scottish cities drive year-round occupancy, and high room rates in key locations such as Aberdeen, Glasgow and Edinburgh mean that demand for additional accommodation – particularly four-star and above – presents significant opportunities for providers, developers and investors,” says Graeme White, international sector head of tourism at Scottish Development International, the investment and trade promotion agency of the Scottish government.
Recent activity in the hotel sector includes IHG’s franchise agreement with Chardon Trading for the Holiday Inn Express Edinburgh Airport; Marriott’s Autograph Collection launch of the Glasshouse in central Edinburgh; the opening of the Marriott Courtyard Aberdeen Airport; and Malaysian firm Tune Group’s opening of the 179-room Tune Hotel Haymarket in Edinburgh. In addition, Z Hotels has acquired a property in Glasgow that it is developing into a 100- to 120-room hotel; Whitbread is opening new Premier Inn venues in Glasgow, Perth, St Andrews and Stirling later this year; and Travelodge plans to open a hotel in Stirling at the end of 2014.
Preparations for the 2014 Commonwealth Games have put Glasgow’s hotel stock in the spotlight. In 2013, Ogilvie Construction announced it had begun work on a new 180-bed Premier Inn and Thyme Restaurant for Whitbread at the city’s Pacific Quay, ready for this year’s event.
Hilton Worldwide is also getting in on the act: earlier this year it unveiled plans to open the country’s first Hampton by Hilton hotel in the centre of Glasgow. Under a franchise agreement with property company SCOT Sheridan and Curo West Campbell, £11m ($17.9m) is being invested in the redevelopment of the property, which will be converted into an 88-room hotel.
Patrick Fitzgibbon, senior vice-president, development, for Europe and Africa at Hilton Worldwide, says: “Visitor numbers to the city are expected to grow by up to 1 million a year until 2016 so the time is right to expand our portfolio here.”
Phil Cordell, global head at Hampton by Hilton, agrees. “With Glasgow City Council investing more than £1.3bn in transport links and infrastructure over the past 12 months, the city is set to enjoy particular benefits from hosting the Commonwealth Games. This makes it a perfect location for us."
Scotland’s hotel trade benefits from an extremely active meetings, incentive, conferences and exhibitions market, with locations such as Glasgow and Aberdeen in particular putting in a strong showing. “Business visitors spend one-and-a-half times more than leisure visitors, with business tourism as a whole worth £1.9bn to the Scottish economy,” says Neil Brownlee, head of VisitScotland’s business tourism unit. “An average of 2.5 million business trips are made each year to Scotland from both overseas and domestic visitors, generating an average of 7.6 million nights and £793m annually between 2008 and 2012,” he adds.
Scotland is outperforming other European countries when it comes to investment returns on a three-year annualised basis in the leased hotel sector. In a 2013 report by Scottish Development International and real estate analyst IPD, Scottish leased hotel returns are ranked eighth out of the 13 European counties in the sample. “The Scottish leased hotel market continues to generate competitive returns compared to other European countries and other classes of property,” says Mr White. “When we consider the UK, all property classes return a figure of 3.4% year on year, but Scotland continues to outperform this return.”
Enhanced flight connectivity is also helping boost the hotel market. Glasgow Airport says it enjoyed its busiest year since 2008 after 7.4 million passengers passed through its doors in 2013. It attributes this third consecutive year of growth to a marked increase in long-haul flights and European traffic. The arrival of airlines such as Wizz Air and Lufthansa Regional has helped increase international passenger traffic, as did the strong performance of long-haul carriers Emirates, United and Virgin Atlantic, all of which reported growth in 2013.
Edinburgh Airport also grew its business last year, handling almost 9.8 million travellers – an increase of 6.3% on 2012. Gordon Dewar, the airport’s chief executive, says 2013 was a year in which it secured three long-haul hub connections and domestic and European services were boosted. It has also started work on a £25m expansion and improvement project.
The cost of this report was underwritten by Scottish Development International. Reporting and editing were carried out independently by fDi Magazine.