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Edinburgh, a solid outlook for the future

The Scottish capital of Edinburgh currently has the attention of many hotel investors. The cultural and historic wealth of the city, and its attractiveness for business clientele make Edinburgh, the second most populated city in Scotland, “The place to be” in the United Kingdom, to such an extent that the country will not take its independence from the power of London. With occupancy rates and RevPARS in the green, and the will to strengthen the hotel industry in the city within the framework of the project Scotland Tourism 2020, there is no doubt that Edinburgh will attract customers and hoteliers in the years to come.

Located to the east of Scotland, the northernmost country in the United Kingdom, Edinburgh is the country’s capital, but not the most populated city. Just 60 km to the west, Glasgow is ahead. In 2013, Edinburgh could rely on a fairly prosperous economy, with an unemployment rate of 6.7%, which is lower than the national average (7.8%), and among the highest average wages in the United Kingdom (£24,628 per year). Several projects are nonetheless underway to bolster the economic and social situation, and tourism will be one of the major – even priority – growth levers. Several projects including tourism and the hotel industry have already been launched, and timetables are set in 2015, 2017 and 2020. With a satisfactory performances since the beginning of the year and recent investments in the upscale category, the city will have one of the most complete accommodations supplies, Edinburgh also wishes to strengthen this sector in light of the tourism program “Scotland 2020” and to confirm its position as second city for tourism in the United Kingdom, after London, through business tourism and the organization of events. This happens through the hosting of major sports events such as the Tour de France, the start of which Edinburgh hopes to host by the end of the decade.

Bringing together all types of travelers: a successful gambit

With 487,000 inhabitants, Edinburgh is far from having as large a population as London, but is also smaller than other agglomerations in the United Kingdom such as Manchester, Glasgow and even Belfast. And yet the Scottish capital was designated second most attractive city in the kingdom for tourists, including business tourism: with 55 international congresses bringing together at least 50 participants in 2013, the city ranks second in the UK after London according to the ICCA (International Congress and Convention Association). Business tourism brings more than £ 300 million to the local economy, according to the Edinburgh Convention Bureau. In addition to business tourism, events and tourist sites also bring many visitors to the Scottish capital.

According to the Scottish tourist office, 6 in 10 of the most visited sites in the country are located in the city, including the National Museum of Scotland (1,768,090 visitors) and Edinburgh Castle (1,420,027 visitors) which are the leading 2 in terms of attendance. The city center is, moreover, on UNESCO’s World Heritage list. Edinburgh makes sure to attract new tourists, starting with Edinburgh Airport that has been restructured to receive flights to and from Doha, Chicago, Philadelphia and Oslo from 2014. As for the seasonality of arrivals, August, according to data from MKG Hospitality “Hit Report” on hotel performances, is when the city reports the best results. August is the month of festivals, among which the most important are the international festival of Edinburgh, the International film festival the Fringe, which offers a wide variety of entertainment and may be described as the biggest performing arts festival in the world (in terms of number of events). The appeal of Edinburgh in August is also evident in the number of domestic arrivals recorded during this month: 258,000 visitors in 2013, which is the most per month throughout the year for any region in Scotland.

To consolidate and strengthen the tourist appeal of the country, a program named Scotland Tourism 2020 was launched, and Edinburgh, the premier gateway to Scotland with close to 9.8 million passengers going through the airport in 2013, is one of the major players for this project. This program outlines and recommends that the festivals, business tourism and Scottish cultural heritage – three aspects that the city of Edinburgh promotes – will receive financing, particularly in terms of marketing, to guarantee better visibility at the destination. The Scottish capital, thanks to its heritage, its advertising and its investments, wants to position itself as a world-class urban tourist destination. It also hopes to develop its tourist supply on the seafront. Finally, the city’s will to strengthen its international reputation results in the development of air connections to new destinations, and the Middle East in particular.
Investments in the Scottish capital aim not only at increasing arrivals and the flux of visitors into the city, but also at increasing the capacity of accommodations. Chain hotels indeed plan to establish their presence durably around the most symbolic and attractive sites in Edinburgh.

A booming accommodations market, growing interst from hotel operators?

The hotel industry, chains in particular, has been through a number of changes. In 2014, Edinburgh had 12,000 hotel rooms including 6,879 from corporate chains, or a 4.8% drop in the chain supply with respect to 2013. However, some projects are now under way to meet rising demand: Ibis has enriched its portfolio with 3 properties and 522 rooms in the city since the beginning of the year 2014.

On the economy segments, the best established chains in the capital at the end of 2013 were Travelodge (10 hotels; 1,056 rooms), Premier Inn by Whitbread (6 hotels; 743 rooms), and IHG with its brand Holiday Inn Express (4 hotels; 447 rooms). While the British chains are well located, French Accor, thanks to the opening of 3 new Ibis hotels in 2014, has become the leading non-British brand in terms of number of rooms in the city. Also on the economy segment, the German chain Motel One is now present with 2 hotels in the city, including one opened in 2014. And the opening of hotels is not limited to the economic category, following a trajectory planned by public authorities.

According to the hotel development plan communicated by the Edinburgh Council, the 4- and 5-star segment was short. The upscale segment had nonetheless a total of 17 chain hotels in 2014, with about 2,900 rooms. Marriott, Hilton, Starwood, IHG and Carlson Rezidor were the first present in the upscale category end 2013. Agreements have also been signed for the arrival of a Marriott Courtyard and a Hyatt in the Scottish capital. The hotel market is the subject of transactions and news headlines that are proof of its current appeal. The group Carlson Rezidor recently launched the first three properties of its upscale brand “Quorvus Collection”, including the G&V Royal Mile Hotel (formerly operated under the Missoni brand) in the center of Edinburgh, while Hilton opened its first DoubleTree hotel in March in the capital. The city center succeeded in attracting upscale hotels in particular, for example the G&V Royal Mile and the Radisson Blu. Despite its UNESCO World Heritage Site listing, the historic center may still accommodate new constructions nearby the tourist sites that are most visited by leisure tourists.

According to data from MKG Hospitality, in 2013 Edinburgh was the city with the best growth in its RevPAR in the United Kingdom (+13.9%), and the year 2014 also shows satisfactory performances. Its RevPAR is the second highest in the United Kingdom after London, which can also be explained by the presence of some very upscale properties in the city center. Over the first 8 months of 2014, the RevPAR at the city’s hotels posted a 1.7% increase, thanks to a 2% increase in average daily rates reaching £79 (excl. VAT), compensating for the drop in occupancy rate, which still remains above. For the month of August 2014, hotels obtained a RevPAR with a solid increase (+5.8%) over August 2013, thanks to an increase in prices (+4%), and an occupancy rate climbing 1.6 point to more than 90%.

Although the city has twice as many hotels as Manchester, it has fewer corporate-operated chain hotels than that city. The development of tourism may be followed by hotel chains along with it, which surely have business opportunities in Edinburgh. In addition to Hilton, which launched its Double Tree brand, other operators such as De Vere have already launched projects.

Building the future on solid foundations

The city will continue to focus on event tourism in the future since the cultural and leisure offer is already well developed as shown by visitor counts for the city’s major monuments. Scotland presented its candidacy for the Euro 2020, which in the end will not be organized by countries, but by cities, with Glasgow as one of the host cities. The proximity of Edinburgh (60 km from Glasgow) could allow it to benefit from some positive windfall. The city is working to host the Grand Départ of the Tour de France in the years to come.

At this time of new technologies, the city of Edinburgh also decided to develop its visibility via mobile media, such as tablets and Smartphones thanks to an application called “Edinburgh Rewards”. Addressing business travelers, this application is part of a loyalty program that gives its user access to exclusive offers.  Edinburgh thus appears to be taking the gamble to turn towards tourism during the decade to come, and the hotel industry will play a significant role in this development project. With the broadest hotel supply in the kingdom after London, hoteliers are thus betting on a radiant future for business tourism and leisure tourism in the Scottish capital, with investments hoped for by 2020, particularly for the chain hotel supply, which remains proportionately fairly weak compared with other major British cities. But as the trend is already towards increasing prices and more chain operated properties, and thanks to a very strong RevPAR, other hotels could be created in the Scottish capital.  

As expected, the referendum of September 18 on Scotland’s independence did not change the deal in the United Kingdom, but Edinburgh has already succeeded in presenting itself as a leisure and business destination in and of itself, with real visibility and an increasingly international role

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