Scotland’s hotels set for strong growth as inflation falls

Dunkeld House Hotel
Scotland’s hotels are set for a further uplift

Scotland’s hotels sector has recovered strongly since the first Covid lockdown four years ago, according to new data.

Accountancy firm RSM’s Hotels Tracker shows profits reaching pre-pandemic levels, with forecasts of better times ahead as inflation falls and consumer spending rises.

Revenue per available room increased from £69.15 to £75.76 year-on year in March, and also sat well above pre-pandemic levels of £59.91 in March 2019, the last year before the pandemic.

Stuart McCallum, partner and head of consumer markets in Scotland at RSM UK, said: “March was a strong month for the Scottish hotel sector, with an event-filled calendar including the Easter bank holiday weekend and Mother’s Day providing a welcome boost.

“March also saw Scotland’s hotels return to pre-pandemic occupancy levels, which is a promising direction of travel. This should help to improve business optimism in Scotland, despite the increase in national minimum wage coming into play in April, which will impact margins going forward.

“Looking ahead to spring and summer months, the arrival of warmer weather and various international events including The Open at Royal Troon, Edinburgh Fringe Festival and Taylor Swift’s Eras tour, Scotland’s hotel sector will likely see an impressive uptick due to UK staycations and international tourists.”

Thomas Pugh, economist at RSM UK, added: “Despite a relatively subdued month for the hotel sector, there are good reasons to expect spending on hospitality services to continue to grow from here. First, households’ real disposable incomes are set to rise rapidly from April as inflation drops back to 2% and tax cuts kick in.

“This will boost overall consumer spending. What’s more, consumer confidence should continue to rise ensuring that households spend most of their new income.

“What’s more, a strong dollar and rapid growth in consumers’ income will make the UK a more attractive destination for visitors from America. Similarly, as the European economies rebound, demand for travel from the continent will increase.”

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