Hotels benefiting from recovery
Oil price rise lifts investor appetite in Aberdeen
Work has begun on the Aberdeen Conference Centre
A recovery in the oil price and major infrastructure projects reaching fruition is raising investor interest in Aberdeen.
Property agent Savils says there are signs of more investment coming in to the city from overseas, particularly from those seeing an opportunity to buy assets at a discount before prices rise.
The city’s hotels are benefiting from this uptake in investor demand with a the arrival of new operators.
In its Aberdeen Hotel Spotlight, Savills suggests Aberdeen’s hotels will see year-on-year revenue per room move into positive territory in the second half of this year for the first time since 2014.
The firm said revenue per room hit ‘rock bottom’ in the first quarter of 2016 following the oil crash.
Hotels are now seeing a positive impact from a steady recovery and positive outlook for the oil price. It has recently been trading at about $80 a barrel and some forecasts expect it to return above $100.
Major infrastructure projects such as the bypass and the Aberdeen conference and leisure centre are helping draw further investor interest.
The new Exhibition and Conference Centre (AECC), due to open in 2019, is expected to attract 4.5 million visitors in its first six years.
Complimenting this is the £20 million expansion to Aberdeen International Airport, increasing terminal capacity by 50% on completion next year, and the £350 million expansion of Aberdeen Harbour.
Steven Fyfe, associate director in the hotels agency at Savills, says: “While there has been a historical dominance and reliance on the oil industry, there are efforts to diversify Aberdeen’s economy and this will prove positive for hotel operational performance over the longer term.”
As a result, Savills says room count in the city is expected to increase by 10% by the end of 2019 (up from 6,867 rooms according to AMPM figures), with a number of new hotel openings and, in particular, the arrival of new branded hotels in a market largely formed of independent operators. New openings include Sandman Signature Hotels opening a third UK hotel on St Andrews Street at the end of May 2018 and a 200-room Hilton Hotel.
The improving outlook for Aberdeen is attracting more investor interest, particularly from overseas, who recognise a window of opportunity to acquire assets at a discount. Hotel investment volumes in the city totalled £12.25 million in 2017 across three deals, following a year of inactivity in 2016, and Savills suggests this trend will continue to build momentum in 2018.
Key deals include the sale of the ground lease investment of the Marriot MOXY hotel, next to the International Airport, to British Steel for £5.7 million, and The Holiday Inn in Westhill and Holiday Inn Express on Chapel Street to Cairn Hotels for an undisclosed sum.