Rising costs are biggest fear in Scots hotel sector

The fear of rising costs – caused by inflation, business rates, staffing and online travel agency (OTA) fees – is the biggest threat facing the hotel sector in Scotland according to industry experts.

Just under half of those surveyed at Addleshaw Goddard’s inaugural Scottish Hotels Conference in Edinburgh prioritised rising costs (46%) ahead of an economic downturn (25%), staffing issues (13%) and political uncertainty (13%) as their top concern.

Nevertheless, Scotland’s hotel sector continues to experience significant growth thanks to record numbers of tourists coming to visit each year. As such, more than three-quarters (76%) of those surveyed identified the strategic importance of air routes to as key to continued growth of the sector.

Across the country, the sector recognises the impact of the oil and gas sector recovery in the north east, with more than half (52%) citing Aberdeen as the city most likely to see the highest Revenue Per Available Room (RevPAR) growth in the next 12 months. This was followed by Inverness (17%), Edinburgh (13%) ang Glasgow and Dundee (9%).

A surge in investment from both domestic and overseas interests has also led to significant hotel development across the country’s major cities and regions. However, nearly half (48%) of those surveyed identified the country’s many underinvested city centre hotels as most likely to suffer from an economic downturn, ahead of country house hotels, luxury hotels and budget hotels.

Addi Spiers, business support and restructuring partner at Addleshaw Goddard, said: ‘Scotland’s hotel sector is riding a wave of growth and a number of factors are playing into this.

‘The Outlander effect, the launch of North Coast 500, the V&As and a host of sporting competitions taking place across the country, have all significantly contributed to an increase in tourism.

‘Underpinned with improved infrastructure in the form of international routes, growth looks set to continue. However, while the outlook is generally positive, experts have shone a light on a number of challenges facing the industry.

‘Specifically, rising costs outwith the control of the industry are causing significant worry, with fears that hoteliers may have to pass on additional costs to the customer. This could negatively impact the number of bookings for many, with upper and upper mid-scale hotels in cities predicted to be hit the worst as customers trade down.

‘In the event of an economic downturn, this impact would be magnified and could be catastrophic for some. Given the current political and economic uncertainties facing the UK, it’s easy to see why rising costs are such a concern.

‘The industry is hugely affected by consumer confidence, and so Brexit negotiations and uncertainty will continue to affect the sector well into 2019 and beyond. In the meantime, many will be looking to the Scottish Budget later this year in search of a respite against rising costs which, as it stands, are proving challenging to contend with.’