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Edinburgh and Glasgow hoteliers achieve modest growth whilst Aberdeen hotels continue to suffer from slowing oil and gas sector
The monthly LJ Forecaster Scottish Intercity Report, from tourism market research specialists LJ Research, tracking city centre hotel performance in Glasgow, Edinburgh and Aberdeen, shows modest overall growth in Glasgow and Edinburgh and a continuation of decreasing profitability among Aberdeen hoteliers in January.
Despite falling by 2.9% compared to last year, demand for accommodation was highest in Glasgow as the city achieved 63.5% room occupancy during the month. In Aberdeen occupancy was only marginally below that of Glasgow at 63.4% (down by 2.8% from last year) as a troubled oil and gas sector continues to weaken corporate demand in the Granite City. Meanwhile, in Edinburgh room occupancy reached 59.9% (falling 0.8% compared to last year).
Whilst room occupancy fell in Glasgow, room revenues continued to grow with January marking the 13th consecutive month of Average Room Rate (ARR) growth. The average cost of a room in the city stood at £59.50 which was 3.1% higher than a year ago. Factoring in occupancy and room revenue performance, average Revenue Per Available Room (RevPAR) – the industry’s main performance measure – in Glasgow was £37.81 (up by 0.8% compared to the buoyant performance of January 2014 when double digit RevPAR growth was recorded compared to January 2013).
Sustained revenue growth has not gone unnoticed by hotel developers with various hotels such as De Vere Urban Village, Ibis Styles and Motel One having properties in the pipeline. Looking ahead, a positive outlook for the next 3 months was recorded with forward bookings up by roughly 2% compared to last year. Councillor Gordon Matheson, Leader of Glasgow City Council and Chair of Glasgow City Marketing Bureau, said: “With our 13th consecutive rise in average room rate it’s never been a better time to consider developing a hotel in Glasgow. As an investment destination Glasgow has risen to the top as one of the UK’s outstanding performers and with the burgeoning convention and events scene in the city confidence in Glasgow is at an all-time high.”
Looking to the future, a noteworthy uptake in the number of bookings for the next 3 months was apparent with, in particular, signs of strong demand throughout February as forward bookings were 5% above those recorded a year ago. Commenting on the positive forward bookings performance Paul Wakefield, Director of Marketing and Commercial at Marketing Edinburgh said: “Overall feedback from Marketing Edinburgh’s members indicates bookings for February and March are performing well. Along with the mass appeal of the Six Nations bringing UK and international visitors to the city, Edinburgh is also hosting a number of high profile conventions in the coming weeks. For example, the Scottish Renewables Conference and Exhibition 2015 and National Association of Pension Funds (NAPF) will bring in a combined 2,300 delegates to the city in March, generating an estimated £2.7m for the local economy and over 2,300 room bookings in Edinburgh’s hotels.”
Meanwhile in Aberdeen, January 2015 marked the first like-for-like fall in room revenues in over 2 years (ignoring the impact of a significant biennial oil and gas conference) as ARR fell by 2.9% to £96.72. The weak room revenue performance combined with a decrease in occupancy to generate negative RevPAR growth of 5.6% with RevPAR standing at £61.31 which was still well above the levels recorded in Glasgow and Edinburgh.
Sean Morgan, Managing Director at LJ Research, said: “2014 was a remarkable year for tourism across Scotland and it is perhaps quite surprising to see rather muted hotel performance in Scotland’s three key cities to start the year. Whilst the trend of steeply falling oil prices appears to have abated, our LJ Forecaster results highlight challenges currently impacting on North Sea oil and gas production and looking to the next few months there are indications of decreasing accommodation demand in Aberdeen. Serviced apartments have been identified as a particularly strong performer this month with operators in Edinburgh starting the year buoyantly. It will be interesting to see how performance pans out in the coming months; this will enable better understanding of the extent of the positive momentum carried through from 2014.”