Inverness hotels have benefitted in recent years from the boom in Scottish tourism, notably from international visitors seeking authentic Highland experiences. Occupancy levels quickly returned to near pre-pandemic levels, despite new hotel openings, with average daily rate (ADR) performance in 2025 8.4% higher than in 2024 and a stellar 45.0% higher than in 2019.
Recent openings including AC by Marriott in 2022 and River Ness Radisson Individuals in 2021 have improved the quality of hotel stock, but also the quantum of rooms, by 45% in the city centre.
Two key development projects for large branded hotels in the city centre stalled during Covid and have not yet been brought back to life; however this is more a factor of prevailing development constraints (notably increases in construction and financing costs) rather than the performance of the market or outlook.
Inverness certainly appears hot in terms of development potential, and is worth a closer look.
Performance Outlook
Inverness is a highly popular leisure tourism destination due to its culture, heritage, starting point for the NC500 and numerous high profile attractions on the doorstep.
However, leisure tourism is seasonal, and any market that can consistently generate over 80% occupancy on an annualized basis must also have a solid base of year-round commercial demand. In this regard, Inverness benefits from being the only city in the north of Scotland, the commercial centre for the Highland region, and for many commercial visitors, a long distance to travel, making overnight stays more likely.
With a great deal of frustrated demand (demand exceeding supply) in the high season (city centre hotels record average occupancy over 90% from May to September), there seems to be ample capacity for more rooms. The result of this current peak in demand is that ADR peaks in August at around 50% above the annual average.
Whilst there are headwinds for international tourism, not least the current geopolitical uncertainties, the outlook remains positive; Inverness, whilst highly popular with North American visitors, has much broader domestic and international appeal.
There are several key private and public sector investment initiatives in commercial and tourism projects that will secure economic growth in the city and wider region, driving future demand growth for hotels. Inverness Airport has seen strong increases in passenger numbers, notably on international routes.
So the outlook is very positive; Inverness will remain a key commercial centre in the north of Scotland and highly desirable leisure tourism destination.
Future Supply Pipeline
It does seem likely as market conditions settle to some form of new normal that there will be renewed interest in developing hotels in the city.
That said, there is only one scheme currently under construction (the 72 bedrooms luxury KIN Hotel due to open in 2027).
Two other schemes in the city centre that have planning consent but stalled during the pandemic (c.160 rooms Courtyard by Marriott and 210 rooms Hampton by Hilton) seem likely to progress in some form or another in the medium term.
Our view is that there would inevitably be a short-term impact on market occupancy of hotels of this size entering the market, and particularly if they opened at similar times. However, the strength of demand and future growth potential means any impact should be relatively short-lived; and as always, it will be the more dated and under-invested properties that will suffer most from any impact.
There may also be a softening of market ADR growth if the quantum of frustrated demand in the high season declines and operators have less leverage to increase room rates to the same extent.
Conclusions
Demand looks set to continue to grow, but the periods of frustrated demand (and therefore the ability to increase room rates in the high season) may diminish somewhat as new hotels open.
We believe it is highly likely that occupancy will remain very strong, in the mid-80s% across the year, but unlikely to go any higher than that due to demand troughs in the winter and Sundays.
ADR we believe will continue to grow, but with the potential for less frustrated demand, slowing to levels more aligned with wider inflation.
Overall, there is an excellent market opportunity in Inverness for increased quality hotel stock. Get in touch for further details or to discuss your project.
Andrew Renouf – 07584 186520
andrew@arhospitalityconsulting.co.uk
Photo by Lewis McCracken on Unsplash