By all accounts it’s been a bumper year so far for Scottish tourism, on the back of a record 2022.

As a result, hotels in Scotland’s two largest cities are experiencing an unprecedented resurgence in room revenue performance driven by strong demand and exceptionally high average room rates.

CoStar reports Edinburgh occupancy for 12 months to September 2023 11.0% higher than the previous 12 months and almost back to the pre-Covid peak. Average daily room rate (ADR) was 13.3% higher than last year, which in itself was a record year for the city.

In Glasgow, occupancy for the last 12 months was 10.1% higher than the previous year, again not far off pre-Covid levels, with ADR unchanged (the previous 12 months included COP26 when room rates in the city were eye-wateringly high for a few weeks in November 2021). September 2023 year to date (YTD) ADR was reported by CoStar to be 10.0% higher than the same period of 2022.

A couple of years ago it was widely anticipated that when demand recovered to pre-Covid levels, ADR might be impacted negatively. However rates have continued to surge, so what’s going on?

Since Covid, Scotland has become an incredibly popular destination for overseas tourists (although to be fair, that trend was well-advanced up to 2019) who on average (and helped by favourable exchange rates) spend more than domestic tourists. According to Visit Scotland, 2022 was a record year for visitor nights from both domestic and international visitors. However, latest data shows a sharp decline in domestic visitors in Q1 2023. With hotel occupancies up significantly across the board in Q1 2023, it seems the gap is being filled by international visitors.

This is borne out by airport passenger data; for August 2023 YTD, whilst both Glasgow and Edinburgh airports still recorded fewer passengers than in 2019 (although Edinburgh was only 4.4% lower), international passengers were on the increase particularly at Edinburgh with 6.6% more than in 2019.

In July and August, Edinburgh Airport returned to previous capacity and has re-entered growth mode much quicker than many people anticipated.

So whilst domestic business travel has not yet returned to pre-Covid peaks, international travel driven by leisure tourism and major events most certainly has.

Whilst these are very strong indicators of both international tourism and hotel performance, we need to remain mindful of the macro factors which could threaten growth as we move towards 2024:

  • Geo-political events and oil price increases could yet again fuel inflation
  • Cost of living and waning pent-up demand could soften inbound tourism demand
  • If that happens, there could also be a softening of hotel ADRs, particularly outside the main season

Nevertheless, I for one remain optimistic about the future as tourism and hotels have yet again proven to be extremely resilient to macro-economic pressures. Scotland has become a highly sought after tourism destination and the broad range of commercial, leisure and event demand drivers across the country all points to continued long-term growth.

Get in touch for further details

Andrew Renouf – 07584 186520 andrew@arhospitalityconsulting.co.uk