Hotels in many UK cities have come under pressure in 2024 with the heady average daily rate (ADR) growth of 2022/23 softening and in some cases declining. This has not been the case in Glasgow, which is enjoying a resurgence in hotel performance, despite the more than 2,000 rooms that have opened since 2020.
According to CoStar, revenue per available room (RevPAR) for 12 months to September 2024 was 7.2% higher than the previous 12 months, driven primarily by ADR growth (up 6.0% to £94.31). ADR was a stellar 30.5% higher than in 2019, and was higher than Manchester, Birmingham, Liverpool and Leeds.
So what is driving this exponential growth?
Breadth of demand
Glasgow has in recent years become a very rounded destination with a broad base of demand drivers including a thriving commercial sector and business district, a cultural city break destination of international repute and a substantial conference, sporting and entertainment event sector. All these sectors are firmly back in growth mode following the difficult post-Covid years.
The impact of new high-quality supply
Much of the new supply that has entered the city in recent years has comprised upscale-plus and contemporary lifestyle products including House of Gods, Sandman Signature, Maldron, Yotel, AC by Marriott and the Address Collection, making the hotel choice more attractive and enabling the best hotels to yield higher rates.
In particular, destination Glasgow has become increasingly attractive to international associations and organisers of large-scale events as the quantum and choice of quality hotel stock grows.
In September year to date (YTD) luxury and upper upscale hotels’ RevPAR was 11.8% up on the same period of 2023, with above average growth in occupancy, demonstrating the appeal of the new higher-end hotels.
Return of business demand to the city centre
2024 is also notable for the recovery and growth in occupancy in the city centre (including SEC) – up 2.6% to 76.8% in the 12 months to September 2024. RevPAR growth for the city centre hotels was 9.2%, with Glasgow Surrounding RevPAR declining by 2.2% as the balance of demand has shifted back towards commercial sectors and business events.
This has been driven by two main factors:
- A return to domestic and international business travel driven by the large financial and professional services sectors, but also by the city’s prevalence in emerging sectors such as aerospace, advanced manufacturing, life sciences and tech
- The impact of the event sector and the world-class facilities available in the city cannot be underestimated; in particular, conference delegates have recovered to pre-Covid levels in 2024 with a year-round programme of events at the SEC and other venues.
Thank you to Edinburgh..!
In addition to driving its own demand, Glasgow has almost certainly benefitted from the stellar performance of Edinburgh hotels in 2024 driven by international tourism; Glasgow hotels offer relatively better value accommodation for visitors who are happy to make the c. 45 minutes rail journey to the capital.
Edinburgh’s occupancy has been well over 80% from April to September, with Glasgow following suit from May to September, and ADR benefitting from that stronger demand.
And what of the future?
We believe the outlook for Glasgow’s hotels is very positive:
- The active pipeline of new hotel developments now looks fairly sparse; whilst there remain a large number of legacy projects in planning, most have been repurposed to other uses or have stalled for the foreseeable future
- The office sector has rebounded with occupier demand and new supply pipeline both strong – a number of notable lettings have been announced in recent months including for SSE and PwC at the refurbished Aurora building in Bothwell Street
- Regeneration and developments in the city are ramping back up following the pandemic including in the main innovation districts
- Glasgow is recognised as a world-leading host for major high-profile international conference and sporting events with demand expected to continue to grow in years to come, aided by the higher number and improved quality of hotels.
What does all that mean for Glasgow’s hotel sector? Almost certainly the city will once again attract significant interest from operators and investors for new stock, which combined with improving macro-market conditions should result in a renewed pipeline of high-quality hotels for the city.
AR Hospitality Consulting has worked on a number of hotel projects in Glasgow in recent years, and it is clear that the future for the sector is bright and that there are likely to be increased investment and development opportunities for new hotels in the coming years.
Get in touch for further details.
Andrew Renouf – 07584 186520
andrew@arhospitalityconsulting.co.uk