REPORT FROM SCOTLAND—Scotland’s hotel industry is re-emerging, enjoying rising development and performance growth, according to sources.
In September, during the Hotel Investment Conference Europe panel titled “Spotlight on Scotland,” Robert B. Cook, CEO of De Vere Group, relayed the following anecdote: “In the 1970s, British Petroleum paid my father £850,000 ($1.36 million) to build a 60-room hotel extension, and they paid to stay there. That was how mad it was in Scotland then, and I am seeing a similar boom now.”
The reasons for Scotland’s re-emergence have been in the works for several decades, according to sources.
Edinburgh remains the cultural highlight. However, Glasgow, which for much of the 20th Century was depressed and industrial, has developed into a second tourism hub since being crowned the European Capital of Culture in 1990, renovating its Victorian architecture and successfully utilizing its Scottish Exhibition & Convention Centre.
The latest Glasgow landmark is the £125-million ($200-million), 12,000-seat SSE Hydro entertainment arena that opened on 30 September adjacent to the SECC. According to the SSE Hydro’s website, the venue will attract 1 million visitors during its 140 events each year, potentially injecting an annual £131 million ($210 million) into the local economy.
Aberdeen also has, according to sources, become the world’s leading center of oil-related technology and services.
In addition, “Aberdeen has seen a comeback in midweek occupancy, now close to 70%,” Cook said.
“There definitely is room for a luxury product in Aberdeen, and I am talking a J.W. Marriott, a Ritz-Carlton—properties of that stature,” Cook said. “Aberdeen and London are the bread of the (United Kingdom) hotel market, with everything in between being mostly filling. I am also seeing key American (hotel industry) muscle coming to Scotland in droves.”
The nerve center of the Scottish energy market is the Aberdeen Exhibition & Conference Centre, which attracts such conventions as the biennial Offshore Europe that hosts almost 50,000 attendees.
“The main drivers into the city are Norwegians, Americans and South Americans, as well as U.K. visitors doing constant business with Aberdeen companies. Aberdeen is the U.K.’s oil hub, thus making the city on par with the London market. Demand has been gradually picking up,” said Roula Samaha, GM at the Malmaison Aberdeen.
“Even Dundee, once known as the poor child of Scotland, is back,” said Graeme White, head of tourism at Scottish Development International.
Heading Dundee’s revival is a spate of new infrastructure, including a new Malmaison hotel to open by the end of 2013 and the first branch of the Victoria & Albert Museum to open outside London by 2015.
Dundee, Scotland’s fourth largest city, also has applied to be named European Capital of Culture in 2017.
Diane Robertson, GM of the 40-room Premier Inn Dundee Centre, said she is seeing an increase in occupancy in the city.
“Most of our rooms are full, even on Sundays, with the closest rooms available at our brand often being seven hotels or so away, either in Edinburgh and Glasgow. A lot of European tourists who visit St. Andrews (the golf resort 13 miles to the south) also elect to stay here,” she said.
White said 10% of Scotland’s gross domestic product comes from its 50 million visitors, with these 2012 figures very likely to see an increase by year end.
“There is a huge opportunity for hotel investment in Scotland, and not just in the cities,” he said. “Edinburgh is the second most popular city destination in United Kingdom, and Residence Inn by Marriott chose in 2012 Edinburgh as its first and so far only U.K. destination.”
Upcoming development
Andrew Pratt, business tourism executive at VisitAberdeen, the city’s tourism organization, said the “goal is to add weekend business” to have that segment near the levels of strong midweek occupancy and rates.
The Trump International Golf Links-Scotland, which opened in 2012 just outside Aberdeen, is one project helping to reach that goal; however, its only lodging is a 16-room country house-style hotel.
“Donald Trump’s plans for a hotel have stalled because he is fighting a wind-farm development just offshore, but he has put in planning permission for a second (golf) course,” Pratt said. “The first course is doing really well, but opinion on the wind farm is mixed. Obviously the renewable energy sector is a growing sector hereabouts, so that industry generally is in support of it.”
Cook, himself an Aberdonian, champions other areas of Scotland, too.
“Edinburgh dipped after the Lehman’s collapse but has bounced back, and De Vere is opening on its outskirts. Edinburgh has 365 days of business. Glasgow is returning, too. In the ’90s, there was a huge rate gap between it and Edinburgh, but that is shrinking, and it, too, has no low spots in the calendar. And now we’re looking at Dundee. Over all of Scotland, the labor pool is very strong,” he said.
De Vere plans to open 120-key properties in Edinburgh and Glasgow, with the De Vere Urban Village Resort Pacific Quay, Glasgow, opening in time for next year’s Commonwealth Games. The De Vere Village Urban Resort Aberdeen will open in November 2014 with 148 keys. Glasgow will also host the 2015 World Gymnastics Championships.
Also in Edinburgh, the Hilton Caledonian underwent a £24 million ($38 million) refurbishment to emerge in September 2012 as The Caledonian, a Waldorf Astoria Hotel, the only Waldorf Astoria-branded hotel in the U.K.
Number crunching
“In the year ending September 2013, property in Scotland increased in value by 1.2%, but hotels did so by 4.8%, with hotel income increasing 6.1%, 0.1% above all property,” according to VisitAberdeen’s Pratt.
Source: VisitScotland Insight Department
“The outlook is set to improve, with income returns remaining Scottish hotels’ most sustainable contributions to total returns. Scotland is beginning to show convergence against the rest of the U.K.,” he said.
According to the 2012 “Scottish accommodation occupancy survey,” Edinburgh (and Lothians) showed the highest occupancy rate in Scotland at 76%, with Aberdeen (and Grampian, 71%), Glasgow (and Clyde Valley, 70%) and Dundee (and Angus, 67%) just slightly behind.
VisitScotland’s “Trends & statistics September 2013” report stated for the first quarter, trips to Scotland were down 8.7%, but spend was up 21.7% year over year.
The report shows a fall in trips from Europe and an increase in spend, but a fall in trips and spend from North America. Visits from markets outside Europe and North America, which were up 30%, with spend up 69%. This “rest of world” market accounted for 34% of total spend.
If there is an elephant in the room, it might be the issue of Scottish Independence, although that possibility doesn’t seem to be of concern to business. Scotland goes to the polls on 18 September 2014 to decide whether it wants independence.