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May 2016 paints a mixed picture for Scottish hotels

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 overall growth in Edinburgh and reductions in performance in Glasgow and, most notably, Aberdeen for the month of May. That said, for the first time in 18 months, hoteliers in the Granite City achieved occupancy growth.

In May 2016, 86.3% of all hotel rooms available in Edinburgh were occupied; this compares with 80.8% in Glasgow and 63.9% in Aberdeen. These figures meant that Edinburgh and Glasgow hotels welcomed fewer guests in May 2016 compared to this time last year as occupancy fell by -1.2% and -5.4%, respectively. In Aberdeen, occupancy rose by 2.2% on May 2015 – a level of performance, however, that was still significantly below the pre-oil price slump figures from May 2014, May 2013 and earlier.

In Edinburgh, lower room occupancy contrasted with a rise in average room rates (ARR). The average price of a room in the Capital was £108.75 which constituted a 5.9% increase compared to May 2015. The figure signalled the highest May room rate recorded since the inception of the Edinburgh LJ Forecaster hotel study in 2005. Factoring in the occupancy and room rate performance, Edinburgh’s Revenue per Available Room (RevPAR) – a key performance metric for the sector – was 4.7% above last year at £93.84.

Glasgow’s lower occupancy levels were accompanied by lower ARR. At £71.43, the average price for a room was down by 1.4% compared to last year. Overall, as a result RevPAR fell by 6.8% compared to last year and by 7.4% compared to May 2014. However, it should be borne in mind that in 2014 Glasgow’s hotel performance was extraordinarily strong as RevPAR grew by circa 25% and therefore the market continues to operate well above pre-2014 levels.

Whilst Aberdeen’s hoteliers noted a small increase in room occupancy, hotel performance overall was still significantly below the levels recorded when oil prices were higher as double digit contractions in ARR continue to severely impact the sector. At 66.19, the average price for a room per night was down by 24.2% during May in Aberdeen. In May there was little evidence to suggest any slowing in the deterioration of rates, however, the small occupancy growth contributed to the lowest RevPAR reduction of 22.5% this year.

Steve Harris, Chief Executive of VisitAberdeenshire, said: “It is very encouraging to hear that occupancy levels in the city have begun to rise. Although we expect it to take some time for the market to return to its previous levels, this is an important first step in that process.

“While on the surface a rise of 2.2% may seem small, it is vital to look at these figures in context. Since May 2015, new hotels have opened across the city – including the Crowne Plaza Aberdeen Airport – meaning that there are more rooms available than ever before. That occupancy levels have risen, then, is much more significant than it first appears.

“Holidaymakers across the UK and further afield are increasingly seeing Aberdeen and Aberdeenshire as an attractive holiday destination. Add to this large scale business events like Liftex International 2016 which are to be held in the city over the coming months, and we are looking forward with hope to seeing occupancy levels and room rates rise further in the near future.”

John Donnelly, Chief Executive at Marketing Edinburgh said: “May was a busy month for Edinburgh, with flagship sporting events such as the Edinburgh Marathon and the Guinness Pro12 Rugby, boosting room rates throughout the month. This was further compounded by high profile international conferences, including the European Conference on Rare Diseases & Orphan Products, which attracted over 750 medical and scientific delegates to the city from across the world.  

“As with previous months this year, Edinburgh is consistently seeing a positive growth in RevPAR, a trend we expect to continue as we move into the busy summer period.”

Sean Morgan, Managing Director at LJ Research said: “May 2016 evidently brought mixed fortunes for Scotland’s city-centre hoteliers. In Edinburgh, a slightly lower occupancy rate was easily acceptable alongside record high room rates. Conversely in Aberdeen, some occupancy growth was overall unimpressive when offset against another month of steep room rate reductions. In Glasgow performance was affected by lower occupancy compared to the last few years. The seasonality of leisure and business events will have contributed to this result. Overall, though performance trends in Glasgow are generally positive, especially compared to pre-2014 levels.”

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