HVS: Edinburgh is new hot spot for hotel expansion

Edinburgh has become the in-place to open a hotel with nearly 1,500 new rooms coming on-stream in the next two years including two properties owned by international hotel chains, according to a new report from hotel consultancy HVS London.

Investors are attracted to Edinburgh because of the city's unique visitor mix which means hotels aren't totally reliant on international tourists or corporate stays. A large number of visitors to Edinburgh come from within the U.K., a fact that has helped the city's hotels perform better throughout the downturn than hotels in the U.K.'s other provincial cities.

Following a dip in 2009, occupancy and average room rates in Edinburgh have shown positive growth in 2010 and into 2011 and look set to improve into 2012. Rooms revenue per available room (RevPAR) for the city's hotels has increased 6.1 percent in the 12 months to April 2011.

Over the next three years, Edinburgh will see a 13 percent increase in room supply across all hotel categories including two international hotel chains—Marriott and InterContinental—opening extended stay properties in anticipation of a revival in the corporate sector. Jumeirah, Hyatt and InterContinental are also thought to be looking for sites in Edinburgh.

International brands with hotels already in the city are adding to their portfolio as well as new entrants, which confirms that investors are seeing the potential for future growth in Edinburgh, commented Lara Sarheim, associate director for HVS London.

New hotels due to open in Edinburgh include a 97-room Premier Inn, a 107-room Marriott Residence Inn and two brands from InterContinental: Hotel Indigo with 60 rooms and Staybridge Suites with 121 rooms. Travelodge will open two further properties and Motel One will open a hotel in summer 2012. In addition, Rezidor Hotel Group will add over 300 rooms to Edinburgh's hotel supply when two Park Inn by Radisson hotels open in early 2013.

"The city benefits from a mix of leisure and business tourism, so hotel performance remains strong all year round," added Sarheim. "As a result, the impact of the economic downturn was less severe in Edinburgh, and the city has emerged largely unscathed with occupancy, average rate and RevPAR growing year-on-year in 2010 and 2011. Full year occupancy in 2009 and 2010 was the second highest in Europe, beaten only by London."

Edinburgh is the U.K.'s most important tourist destination after London, attracting more than 3.5 million visitors a year. The city generates demand from both leisure visitors (approximately 75 percent, including those visiting friends and relatives) and business travellers (approximately 25 percent).

Some 60 percent of visitors to Edinburgh are domestic U.K., but the airport has shown significant growth in international and domestic numbers over the past ten years, last year handling over 8.6 million passengers. Numbers will continue to increase as plans for expansion progress.

HVS's annual Hotel Valuation Index (HVI) places Edinburgh 14th in European cities in terms of hotel value per room. The city ended 2010 with values of more than $260,000 per room for a four-star, city-center property. By 2015, HVS forecasts that values per room in the city will rise to more than $330,000.

**Hotel performance data provided by STR Global.