Princes Street Gardens, Edinburgh

Investors shop for Scottish hotels in 2017

Hotels in UK regional cities are in high demand with global investors, fuelled by the relative weakness of sterling, resulting in advantageous exchange rates, and the sharpness of yields in prime markets, which provide owners with the opportunity to sell very comfortably at the moment. Scotland, with its buoyant tourism industry, is attracting significant interest from international investors: in the year to date, overseas investors have spent £51.295 million on Scottish hotels.

US investors have been the most prevalent in Scotland, spending £35.3 million since January, all of which was invested in Edinburgh. Key deals include US-based PGIM’s acquisition of Safestay Hostel, International Hotel Properties Limited (from the British Virgin Islands) buying Holiday Inn Express – the largest single transaction by an overseas investor at £17.7 million – and a US investor purchasing The Bonham Hotel.

Indian investors have also been active, deploying £8.3 million in key deals, including MGM Muthu acquiring both the Highland Heritage Portfolio and Newton Hotel in Nairn. Chinese group Creation Gem International Ltd has acquired The Isle of Eriska Hotel and Spa while 7 Hospitality (Singapore) has bought Dundee’s DoubleTree Hilton. With significant global interest in Scotland, we anticipate a further £40-45 million of transactions before the end of the year, placing total annual turnover significantly ahead of 2016 volumes.

Edinburgh remains the most sought after hotel market in the UK outside London, where occupiers and investors are keen to increase their presence by virtue of size, various brands and new concepts. There has always been a four-figure pipeline of new rooms in Edinburgh, but demand is such that the city can easily absorb new supply as owners and managers note an ever longer ‘peak season’ for business. In particular we expect the arrival of the W Hotel to trigger other high-end operators to also look at opportunities.

Despite Edinburgh’s dominance, Scotland’s competitive tourism industry makes assets located elsewhere also attractive investments and this is highlighted by some of the deals we’ve seen this year. Meanwhile the improving leisure scene in Glasgow, which includes the Hydro Arena, part of the Scottish Event Campus (SEC), has seen the city’s hotel sector evolve to accommodate more than just business tourism. Key developments in Glasgow include Motel One which, with 374 rooms will be Scotland’s largest hotel by room numbers, and the first Radisson Red in the UK, with 176 rooms, opening next to the SEC. Both developments are due to launch in the first quarter of 2018.

Investors are busy checking into Scotland. Our biggest challenge going forward will be having enough hotels for sale to cater for the weight of demand.

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