The monthly LJ Forecaster Scottish Intercity Report, from tourism market research specialists LJ Research, tracking city centre hotel performance showed significant drops in Aberdeen, a stable market in Edinburgh and further growth in Glasgow.
Despite falling by 1.7% compared to last year, average room rates were highest in Edinburgh as the city achieved an ARR of £102.67. In Aberdeen, ARR stood at £87.33, which is down a hefty 15.6% from last year due to the significant decline of corporate demand within the oil and gas sector. Meanwhile, Glasgow achieved revenue growth of 2.1% resulting in an ARR of £72.42.
Scotland’s capital also saw a slight reduction (0.8%) in its occupancy figures with 87.3% of the city’s room stock sold in May 2015. Factoring in occupancy and room revenue performance, average Revenue Per Available Room (RevPAR) – the industry’s main performance measure – in Edinburgh was £89.63 (down by 2.5% compared to May 2014).
Although Edinburgh’s performance in May was flat, hoteliers’ sales-on-the-books figures indicate that demand is creeping up: at the beginning of June, Edinburgh’s hotels sold 80.6% of their June room stock and 65.7% of their July room stock (up 1.2% and 0.9% respectively).
John Donnelly, Chief Executive of Marketing Edinburgh said: “As Edinburgh gears up for the busy summer months, it’s positive to see occupancy remaining at almost 90% while sustaining high room rates. A number of prolific conventions including the XVth IWRA World Water Congress, the Annual Meeting of the International Society for Behavioural Nutrition and Physical Activity and the European Association of Plastic Surgeons, also helped boost occupancy and generated a combined £4.4M for the local economy.”
Even though Glasgow’s occupancy fell 2.7% on May 2014 to achieve 85.4%, RevPAR only fell a minimal -0.6%; to £61.71 for May 2015. RevPAR in Glasgow, however, is at its highest level in the year to date.
Based on current sales-on-the-books figures, Glasgow’s hoteliers are unlikely to match last year’s record occupancy achieved during the Commonwealth Games in July and August. That being said, June forward bookings are depicting a very positive figure of 77.3% of all rooms sold (up 9.7%). Similarly, sales-on-the-books for the months of July and August are currently higher than they were two years ago (in the like-for-like period before the Commonwealth Games) which suggests that Glasgow’s growth will continue.
Scott Taylor, Chief Executive of Glasgow City Marketing Bureau (GCMB), said: “This latest report from LJ shows that hotel performance in Scotland remains strongest in Glasgow. Putting the extraordinary period of the Commonwealth Games aside, forward bookings this summer are better than the same period of 2013 and with the recent opening of Go Glasgow Urban Hotel and the imminent opening of The Village Hotel in the city we expect continued growth in the months ahead.”
The cautious recovery of oil and gas prices does not seem to trickle through to Aberdeen’s hotel industry: although hoteliers had previously been optimistic about May’s performance, dire times May marked the 6th consecutive month of year-on-year decreases in occupancy rates, with hotels selling just 62.5 % of its rooms in May 2015 – down 17.3% compared to last year.
Double digit decline in both occupancy and ARR has resulted in a staggering 30.2% decrease in RevPAR to £ 54.63. This is the lowest yield figure on record for Aberdeen since December 2012.
Hoteliers and other businesses have indicated that these fluctuations are of a cyclical nature and that prosperity will once again return; however, recent news has also revealed that hotel developments in the pipeline have fallen through, which indicates business confidence may not be as high as previously thought.
Iain Watson, Chairman of the Aberdeen City and Shire Hotels’ Association says, “Everyone living and working locally is aware that the city’s economy shifts with the cyclical nature of the oil and gas industry. We’re facing a drop in both occupancy and room rates and, like most industry sectors in Aberdeen, we’re looking at efficiencies in operations. There have been several previous downturns in Aberdeen linked to oil prices and this will undoubtedly not be the last. But, the city always proves to be resilient to these slumps and recovers. I am sure that the city will recover from this current economic downturn.”
Tom Mathar, Research Manager at LJ Research said: “Our May report shows mixed fortunes for hoteliers in Scotland’s three biggest cities: in Glasgow and Edinburgh, hoteliers trade in growing and stable markets. In Aberdeen, where only a year ago getting a bed was difficult at any price, a hefty 30.2% decrease in yields indicates that the industry may need to accept that hotel performance will cool down this summer as occupancy decreases even when room rates become more affordable.“
LJ Research is a full-service market research agency based in Edinburgh, Scotland undertaking quantitative and qualitative market research. We’re experts in analysing customer feedback and delivering actionable insights.
As a market research agency we’ve worked with dozens of tourism businesses and consultants over the years using a variety of methods to address these and many more tourism research requirements.