- Hotel Market Research
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The monthly LJ Forecaster Scottish Intercity Report, from tourism market research specialists LJ Research, tracking city centre hotel performance in Glasgow, Edinburgh and Aberdeen, showed that hotels in Scotland’s two largest cities significantly grew their room rates whilst those in Aberdeen suffered again from double digit contractions.
Both Glasgow and Edinburgh achieved their fourth consecutive month of average room rate (ARR) growth in March 2016. Outperforming recent months’ growth, hoteliers in Glasgow and Edinburgh achieved notable increases in ARR of 7.8% and 10.8%, respectively. The average cost of a hotel room during the month in Glasgow and Edinburgh was consequently £74.29 and £92.12, respectively. Meanwhile in Aberdeen, room rates declined by a staggering 27.0% compared to last year resulting in an ARR of £68.55. This constituted the sixth successive month of double digit reductions in ARR in the Granite City.
Glasgow achieved the highest room occupancy in March 2016 (78.9%) despite falling by 3.8% compared to last year. Edinburgh’s occupancy remained on par with last year as 75.4% of its room stock sold. Whilst, in Aberdeen, occupancy fell for the 16th consecutive month as an average occupancy of 56.6% was achieved. Compared to last year, this was a 16.3% reduction in demand for accommodation.
Revenue Per Available Room (RevPAR) – the industry’s main performance measure which combines occupancy and room rate performance – showed similar trends with growth in Edinburgh (10.8%) and Glasgow (3.6%) and stark decline in Aberdeen (-38.9%). This resulted in RevPAR of £69.42, £58.47 and £38.80, respectively.
Looking ahead, hotels in all three Scottish cities saw reductions in forward bookings for the next three months compared to figures from this time last year. Indicating a note of optimism for some potential stabilisation in the market, Aberdeen saw the smallest decrease in forward bookings for the quarter (0.4%) with Glasgow and Edinburgh seeing reductions in forward bookings of 2.6% and 5.5%, respectively.
John Donnelly, Chief Executive at Marketing Edinburgh said: “Edinburgh’s enduring popularity as a visitor destination has once again led to it achieving the highest room rates across all of Scotland’s cities. The average room rate increase of almost 11% on last year is also further testament to the value flagship sporting events such as the Six Nations bring to Edinburgh. The Scottish rugby team were not the only winners that weekend.”
Steve Harris, Chief Executive of VisitAberdeenshire said: “For decades, the cost of hotel rooms in Aberdeen has been closely linked to the success of the oil sector. Now that this sector is experiencing extensive challenges, there are significant opportunities to attract leisure visitors to the city which have previously been effectively ‘priced out of the market’.
At VisitAberdeenshire we are working with the Hotels’ Association to bring more leisure visitors to the area which has undoubted appeal for visitors with dolphins virtually in the city centre, more castles per acre than anywhere in the UK, a top quality golf product, and the world’s only malt whisky trail. There is no doubt that the problems in the oil industry are seriously impacting on our hotels; but this does mean that room prices are more attractive to leisure guests.”
Sean Morgan, Managing Director at LJ Research, said: “So far this year, hoteliers in Edinburgh and Glasgow have struggled to fill hotel rooms at the same volume as last year. Encouragingly, however, effective revenue management has contributed to drive up room rates at a greater pace than the decline in sales. The end result is positive growth overall in Q1 for Edinburgh and Glasgow hotels.
The impact of sport in March was pronounced for Scotland’s two largest cities with Edinburgh benefitting from a Scottish rugby triumph over France at Murrayfield and Glasgow hoteliers drawing demand from the World Cup Gymnastics held in the city.
Our unique forward bookings analysis indicates a continuation of the current trend with flat or declining levels of occupancy over the next few months. It’s notable to report a slowing decline in future bookings for Aberdeen hotels this month. Indeed, there’s evidence of greater accommodation demand beyond May compared to last year. Ongoing market adjustments to the price of oil will do much to convert (or otherwise) these signs of recovery over the next few months.”