Deals increase

Staycation trend drives investment in hotels

The Scores Hotel
The Scores Hotel in St Andrews was among the deals completed

Scottish hotels continue to be in demand as investors seek out UK locations likely to remain popular in the staycation market.

Agents sold 18 hotels in 2021 with a total value of £185 million which represents a 166% increase on the £70m transacted in 2020 and is 12% up on the 2019 total of £165m.

Real estate adviser Savills notes that 54% of deals in 2021 involved domestic buyers.

Steven Fyfe, associate director in Savills Scottish Hotels team, said: “Despite the inevitable impact of hotels essentially being closed during the pandemic, Scotland was high up the staycation list when restrictions began to ease after the first lockdown.

“As a result, our hotel market has performed relatively well over the last 12 months and we have seen renewed interest from investors who have shown confidence in the sector.

“This is evidenced in particular by many deals taking place during the first half of the year when hotels in the region had not fully reopened. When hotels did actually open in May 2021, it generated further confidence in the market.”

Key deals to have taken place in Scotland last year include the sale of the Macdonald Holyrood Hotel, the acquisition of the Scores Hotel St Andrews and the purchase of Bruntsfield Hotel Edinburgh.

Scotland has also seen several high profile and established brands committing to its cities including the W Hotel Edinburgh, which will open at St James Quarter in July 2023 and Virgin Hotel, arriving in both Glasgow and Edinburgh city centres in March 2022.

In addition to this, Gleneagles is expanding through the introduction of a private members’ club in the heart of Edinburgh that will also offer 33 bedrooms. 

Mr Fyfe added: “The market has entered 2022 with the strong sentiment of 2021 behind it, however, the sector faces a number of headwinds.

“Government support has been slowly tapered with the withdrawal of the furlough scheme at the end of September and the VAT rate for retail and hospitality increased from 5% to 12.5%, before returning to the standard 20% on 1 April 2022. 

“Looking forward, as businesses increasingly put ESG at the forefront of their strategic plan, we also need to consider what that will look like for the sector.”

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