Investment in Scottish hotels in 2017 reached £195 million across 23 deals, marking more than a 60% increase on the total investment volume recorded the year previously (£119.74 million*).
In terms of geography, the firm reports Edinburgh saw the highest volume of hotel investment in the year of all the Scottish cities, accounting for 64% of all Scottish transactions totalling more than £117 million, a 58% increase on 2016 volumes. The strong activity places Edinburgh ahead of both Birmingham and Liverpool to become the second largest target city outside of London in 2017, in terms of hotel investment volumes, after Manchester. Investment into Glasgow in 2017 more than doubled – rising from £16.8m in 2016 to £35.79m, says the firm, while both Dundee and Aberdeen saw encouraging increased year on year investment volumes (totalling £5.5 million and £5.7m, respectively).
According to Savills research overseas investors dominated 2017 transaction volumes in terms of buyer type, totalling £57.4m – more than 7x larger than the level of investment by international buyers the year prior (£7.8m). US investors took the lion’s share of activity, followed by those from Singapore, India and Hong Kong.
Steven Fyfe, associate in the hotels team at Savills Scotland, comments: “2017 marked a year whereby the operational and investor sentiment of hotels were both at strong points in the cycle. The momentum has continued and Q1 2018 looks set to deliver in excess of £110m in transactions in a period that is usually notoriously quiet. The improved performance is expected to offset the 9% increase in supply anticipated throughout 2018.”
The level of interest in Scottish hotels highlights a wider national trend that sees the asset class at the top of the investor’s wish list, says Savills, with strong appetite amongst both domestic and overseas sources. According to the firm’s research investment into the UK hotel market reached £5.4bn across 219 deals in 2017. This total represents an increase of 32% from 2016, in which levels totalled £4.1bn and is 51% above the 10 year average of £3.6bn.
Martin Rogers, head of UK hotel transactions, adds: “The popularity of the UK has been boosted in 2017 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.”
Key deals in Scotland include: 5-star The Scotsman Hotel in Edinburgh selling to private investors, G1 Group; and the £33.31m sale of Premier Inn St Enoch Square in Glasgow.
* 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).
Steven Fyfe, associate in the hotels team at Savills Scotland