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Scotland hotel room rates drop

March average room rates decrease in Aberdeen, Edinburgh and Glasgow.

The latest monthly LJ Forecaster Scottish Intercity Report, from tourism market research specialists LJ Research, tracking city centre hotel performance in Glasgow, Edinburgh and Aberdeen, shows that average room rates decreased in Scotland’s three key cities.

Whilst room rates decreased in Glasgow’s city centre, the destination in some ways bucked the trend: at £68.91, average room rates decreased 0.5% year-on-year (i.e., marginally and at a much slower rate compared to other cities); occupancy, however, rose a solid 5.7% to reach a whopping 82.0% - the highest occupancy achieved among Scotland’s three key cities and, indeed, the highest March occupancy ever achieved in the city. As a result, RevPAR was up 5.1% on March 2014 to reach £56.45.  

Glasgow City Marketing Bureau (GCMB) believes March’s visitor influx can be attributed to a number of events and conferences that took place in the city throughout the month. This included the Annual Congress of the European Atherosclerosis Society and the Scottish National Party’s spring convention, which collectively brought more than 4,000 delegates to Glasgow. Additionally, Disney on Ice and Premier League Darts at the SSE Hydro as well as performances by Usher, Paloma Faith, Lionel Ritchie, Noel Gallagher and Morrissey, and the Scottish League Cup Final between Celtic and Dundee United at Hampden all helped to boost occupancy in the city.  

Scott Taylor, Chief Executive of Glasgow City Marketing Bureau, said: “The 12 days of the Commonwealth Games have translated into 15 consecutive months of growth in Glasgow with some of the highest occupancy rates on record in the city. This is the legacy of the Games, which will be felt in Glasgow for the next decade. Our research shows that occupancy in Glasgow last month was the strongest of any major city in the UK and Europe.”  

Significantly less demand in Aberdeen and Edinburgh
Despite the ongoing oil price rebound, demand for accommodation in Aberdeen – the capital of North Sea oil – continued to decline. Occupancy fell to 67.6%, down 8.0% compared to March 2014; average room rates fell 3.2% to reach £93.30. Revenue per available room – or RevPAR, which combines room rate and occupancy performance – consequentially dropped by 11% to reach £63.49.  

Business confidence in Aberdeen is running low as many hoteliers report corporate clients introducing travel and accommodation bans or requesting rate reductions – a rare move for the once buoyant industry. Indeed, hoteliers’ sales-on-the-books are significantly lower compared to previous years: as at 1st of April, 46.7% of Aberdeen’s total room stock was sold for the rest of the month; and only 29.4% of the total room stock was sold for May. This is down 12.6% and 6.8%, respectively, compared to last year.  

In Edinburgh too, room rates decreased in March 2015 compared to March 2014. The average room rate for the month was £83.10 – down 4.0% year-on-year. Occupancy however increased slightly to reach 75.4% - 1.3% more than in March 2014. RevPAR, the industry’s main performance measure, decreased as a result of room rates falling more steeply than occupancy rose: RevPAR in Edinburgh was £62.66 – down 2.7% on March 2014.  

City centre hoteliers in Scotland’s capital quoted various reasons for the unexpectedly quiet month. Room rates were reported to be affected by corporate bookings shifting volume from full service brands to limited service establishments. Some reported that the rugby weekends were less busy compared to previous years; whilst others said that fewer events at the Edinburgh International Conference Centre negatively impacted their books. Lastly, there was a feeling that increased room supply following a series of hotel openings in the city resulted in a drop in rates to fill rooms.  

Reflecting on Q1 2015 as a whole, Sean Morgan, Managing Director at LJ Research, stated: “Yields in Edinburgh and Glasgow have by-and-large been on par with last year with RevPAR hovering around £50. Although Aberdeen, the Granite City, continues to outperform central belt destinations at the absolute level, the year-on-year trend is markedly different as the city has suffered near double digit declines in hotel profitability.”  

“As election fever mounts and with it the uncertainty of future Westminster priorities, the coming month or so is unlikely to see significant positive change for hotel corporate and business travel segments as many organisations await the outcome of May 7th. However, as the labour market continues to strengthen, high levels of consumer confidence will continue to positively drive discretionary business for hotels.”

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