Scotland’s hotels ‘enjoy bounce after Covid pandemic’
Scotland’s hotel market is experiencing a “welcome post-covid bounce” but operators are facing huge pressures, a report suggests.
Avison Young’s latest hotel market overview highlights thereturnofinternationaltravel alongside large conferences and events, helping the sector reach,orinsomecasessurpass, pre-pandemic demand.
Andrew Renouf, principal, hotels and leisure, at the estate agent, said: “In most markets year-to-date average daily rates (ADR) have surpassed pre-covid levels and we expect demand (occupancy) to follow suit during 2023. As a result, hotels in most markets are generating higher revenues than in 2019.
“There are, however, significant economic headwinds that are impacting operating costs and profitability.”
The hotel recovery is driven by ADR, with demand (occupancy) still lagging 2019 levels, the report notes. Exceptions are Aberdeen’s upscale hotels, and East Lothian and Renfrewshire where year-todate occupancy is equal to or higher than in 2019.
Aberdeen is being underpinned by the energy sector with the city’s corporate market less affected than in other cities.
Renouf added: “The main cost pressures currently are in two key areas; energy and labour. Energy costs for hotel companies who pre-bought at fixed prices are unlikely to see an impact of profitability until later this year or early next year.
“Hotels by their nature require intensive energy consumption and those without fixed utility contracts have faced the burden of massive increases this year.
“There are increasing pressures around labour availability and pay rates. Demand for staff is currently outweighing supply and as a result the labour market is highly competitive and salary expectations are much higher than even a few months ago.”
The firm’s hotels team found that Scotland as a whole is performing well, with revenue per available room in line, or ahead of 2019, in most cases.
Edinburgh has seen a quicker recovery than Glasgow for two main reasons, according to the Avison Young study.
The proportion of high-end hotels in Edinburgh is helping to drive ADR higher. And, while Glasgow has seen a 9.9 per cent increase in supply since January 2020, Edinburgh supply has increased by just 4.4 per cent, impacting Glasgow’s recovery as it absorbs the new supply, the report notes.
Airport passenger numbers show demand ramping up towards 2019 levels at Scotland’s main airports, highlighting the correlation between improved hotel performance and increased travel. Transactions involving the sale and purchase of hotels in Scotland have also picked up, the firm added.
Renouf said: “There is no shortage of interest in Scottish hotel assets, with a large amount of private equity ready to be placed in the sector and a number of deals having completed since late 2021. Edinburgh continues to be a soughtafter destination and investors are seeking to benefit from the market’s post-pandemic recovery by acquiring high quality, city-centre assets.”
Headded:“overall,ithasbeen an encouraging period for the hotelsectorinscotland,however clear challenges remain and will likely continue into 2023 and beyond.”