The monthly LJ Forecaster Scottish Intercity Report, from tourism market research specialists LJ Research, tracking city centre hotel performance showed performance showed market growth in Edinburgh, occupancy increase in Glasgow and sustained losses in Aberdeen.
Edinburgh’s August festival season which includes the Fringe – the world’s largest art festival – contributed significantly to generating staggeringly high room occupancy of 93.6% in the city during the month, although this was down slightly by 0.7% compared to last year.
Highlighting the strength of demand for accommodation, on 19 separate occasions during the month hotel occupancy soared to 95% or above.
With domestic and international inbound flights to Edinburgh Airport at record levels coupled with Edinburgh Fringe ticket sales up 5% compared to last year, the (albeit marginal) decline in room occupancy compared to last year may seem somewhat unexpected.
Over the past 12 months, however, the city has seen some 1,000 extra hotel bedrooms added to its offer. At the same time, short-term apartment and room-rental service AirBnB saw its number of capital-based listings grow by 86% over the past year. These factors combined illustrate a more competitive market for accommodation providers during this peak month.
Buoyed by strong festival demand, the average room rate (ARR) in the city grew a noteworthy 6.7% from last August to a staggering £161.46. This is the third consecutive month that the city has seen room revenue growth.
Factoring in both occupancy and revenue performance, Revenue Per Available Room (RevPAR) or yield – a key hotel performance metric – was £151.17, up 6.0% compared to last year.
One year on from the historic referendum and Ryder Cup, there are signs of weaker hotel demand for September in Scotland’s capital as forward bookings for the month were down by 6.2% compared to last year. International conferences as well as key leisure events like Foo Fighters at BT Murrayfield Stadium will help to address this potential decline.
Lesley Williams, Head of Business Tourism at Convention Edinburgh, said: “August is always an incredibly busy month with visitors from across the globe seeking accommodation during the Festival months. It is great to see Edinburgh hold on to the highest occupancy rate Scotland-wide for another consecutive year.”
“Coupled with increased demand for beds during the summer months, Edinburgh continues to attract new accommodation providers to the city. Over the past year, capacity has been increased by 1,000 bed rooms – an incredibly positive contribution to our long term ambition to grow additional quality accommodation options for city visitors and business travellers further. The increase in average spend on accommodation is therefore very encouraging.
“Growth in further high-end accommodation not only ensures a positive experience for visitors but also attracts conference and events business, in turn contributing to the city’s continued economic growth.”
Glasgow’s hotel sector returned its highest August occupancy on record with 93.4% of its rooms sold – an increase of 2% on the previous year. Large scale conferences at the SECC combined with several major events meant city hoteliers achieved an astonishing 22 nights where occupancy reached 95% or greater.
The cost of a hotel room decreased by 5.4% as ARR fell from £78.99 last August to £74.74 this year. However, this decline is a result of the Commonwealth Games having driven exceptional growth in 2014.
Comparing like-for-like data from those dates in August 2014 when the Games did not take place to the same period this year suggests Glasgow achieved an encouraging overall 3% increase in ARR.
Combining occupancy and revenue figures, Glasgow’s RevPAR stood at £69.79, which although was 3.4% down on 2014 signified impressive double digit growth of 19.4% on August 2013.
Scott Taylor, Chief Executive of Glasgow City Marketing Bureau, said: “Glasgow’s hotel occupancy in August was virtually the same as in Edinburgh, but without the festival, which shows that the city’s tourism demand is year round. Leisure and business tourism are crucial pillars of Glasgow’s economic strategy and August was another mega month for the city, which saw our hoteliers achieve record-breaking occupancy.
“Alongside flagship events such as the World Pipe Band Championships and Piping Live, the Merchant City Festival and the UDO World Street Dance Championships, which collectively attracted thousands of visitors and competitors from more than 30 countries, August also brought a number of high-profile conferences to the city.
“The International Bible Students Association (IBSA) Annual Congress and the International Congress of Phonetic Sciences, for example, saw around 9,000 delegates arrive in Glasgow and generated £8.5 million for the local economy.
“It’s clear to see that Glasgow’s tourism and hospitality industry is thriving and we expect continued growth in the months ahead. With three new hotels set to open by the end of the year, which will add nearly 400 rooms to our ever-growing accommodation stock, investor confidence in the city is at an all-time high.”
In Aberdeen, the continued negative trend was again apparent this month as fewer rooms were sold compared to last year — 70.0% compared to 79.3% in August 2014 which constituted a fall of 11.8%.
Hotel revenues experienced another month of double digit reductions (for the fourth consecutive month) as ARR dropped by 13.4% to £78.90. Consequently, RevPAR decreased by 23.6% to £55.21.
As at the start of September – a month which marks the biennial SPE Offshore Europe Conference & Exhibition – business on the books for hotels in Europe’s oil and gas capital were down by over 20% compared to the last time the conference was held in Aberdeen in 2013. The outlook for the next three months does not paint a particularly positive picture with occupancy seven percentage points lower on average compared to the same time last year.
Iain Watson, Chairman of the Aberdeen City and Shire Hotels’ Association said, “The hotel sector in Aberdeen continues to face challenges. This situation is expected to continue for some time to come, but we are very optimistic about the long-term future.
“There is ongoing hotel development in the city and major corporations continue to have the confidence to invest. From a national and international perspective, Aberdeen is seen as a city with long-term investment opportunities and the current issues are regarded as being short to medium term.
“We view the fact that we now have 500 more hotel bedrooms in Aberdeen than during the last time Offshore Europe was held two years ago positively, as shortage of supply had been an issue during major events in Aberdeen.
“I believe that many of our member hotels were fully booked for the oil show and some only had a few rooms available. With more bedrooms now on offer, it stands to reason there will have been less pressure on hotels.”
Sean Morgan, Managing Director at LJ Research, said: “The July and August LJ Forecaster figures highlight a prosperous summer period for Edinburgh hoteliers and the local tourism sector overall. For hoteliers, the revenue growth recorded in August will be particularly pleasing in light of increasing hotel supply and the increasing presence of AirBnB in the city. Our forward bookings analysis indicates a significant decline in volume for September. If this is realised, hoteliers will need to drive up their revenues to continue the strong RevPAR growth path of the last two months.
With a record August occupancy, Glasgow continues to reap the benefits of significant business and leisure tourism coming to the city. The positive revenue performance compared to 2013 in the face of increasing supply highlights the extent of a longer term path of growth in the hotel sector in Glasgow.
Aberdeen’s hoteliers saw another month of double-digit decline as the oil and gas sector continues to suffer from a global oversupply of oil. Weekday room rates fell significantly more than weekend rates, 19.3% and 12.4%, respectively, which highlights the city’s reliance on sparser oil and gas corporate guests.”
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