Investment in Scottish hotels in 2017 reached £195 million across 23 deals, marking more than a 60 per cent increase on the £119.74 million* total investment volume recorded in 2016. Interestingly the average hotel sale price in 2017 also outstripped the 2016 average by nearly 60 per cent, rising from £7.044 million to £10.835 million, which we put down to keener pricing on the back of stronger operational performance.
In terms of geography, high-profile sales such as that of The Scotsman saw Edinburgh take the highest volume of hotel investment in the year of all the Scottish cities. Scotland’s capital accounted for 64 per cent of all Scottish transactions, totalling more than £117 million, a 58 per cent increase on 2016. This places it ahead of both Birmingham and Liverpool as the second largest target city outside of London in 2017 for hotel investment volumes, after Manchester.
Meanwhile, investment into Glasgow in 2017 more than doubled – rising from £16.8 million in 2016 to £35.79 million, boosted by the £33.31 million sale of Premier Inn St Enoch Square in Glasgow. Elsewhere both Dundee and Aberdeen saw encouraging increased year on year investment volumes (totalling £5.5 million and £5.7 million, respectively).
In terms of who’s buying, overseas investors dominated 2017 transaction volumes. They were responsible for £57.4 million of deals – more than seven times larger than the level of investment by international buyers the year prior (£7.8 million). US investors took the lion’s share of activity, followed by those from Singapore, India and Hong Kong.
The level of interest in Scottish hotels highlights a wider national trend that sees the asset class at the top of investors’ wish lists. Strong appetite amongst both domestic and overseas sources has been boosted by the rise of the staycation and the stability following the EU referendum in 2016. We expect this popularity to continue as hotels move further into the mainstream.
In Scotland in particular, 2017 marked a year in which the operational and investor sentiment of hotels were both at strong points in the cycle. The momentum has continued and the first quarter of 2018 looks set to deliver in excess of £110 million in transactions in a period that is usually notoriously quiet. The improved performance is expected to offset the 9 per cent increase in supply anticipated throughout 2018.
* This analysis includes ‘Project Dorm’ which consists of the sale of both the Edinburgh Safestay Hostel and another hotel in London, totalling £11.42m for the whole portfolio.