'Party's over' as hotels face gloomy 2008

Published on Saturday 5 January 2008 15:18

SCOTLAND's hotel trade has been told it will face a tough 2008 as the economic slowdown starts to bite, undermining ambitious government targets for the tourism industry.

Accountancy firm Deloitte forecasts stagnation this year for the hotel industry, with figures likely to disappoint even in Aberdeen, the city which achieved the fastest-growing revenue per room in the UK last year.

Despite double-digit growth in 2007, Deloitte says the UK hotel industry will be hit by a downturn in consumer spending this year. Scottish hotels will also see a reduction in demand from oil companies, which plan to reduce North Sea oil production within the next 12 months.

Roger Bootle, economic adviser to Deloitte, said slower consumer spending would hit the trade hard. He said: "2008 is likely to be the year when the party ends."

Marvin Rust, hospitality managing partner at Deloitte, said: "So far, the UK hotel industry appears unscathed by troubles across the Atlantic and at home, but with an increasingly gloomy global outlook, it would be a brave man to predict that 2008 will be as good as 2007."

The forecast will come as bad news for Scottish tourism minister Jim Mather, who is pushing ahead with targets to increase tourism revenue in Scotland by 50% over the next seven years.

The target has been met with some scepticism by industry leaders and will form the focus of an inquiry by Parliament's economy, energy and tourism committee later this month.

In a written submission ahead of the hearings, seen by Scotland on Sunday, the Edinburgh Chamber of Commerce called the target unrealistic and ill thought out.

Douglas Logan, chairman of the ECC, wrote: "The high level growth is looking increasingly difficult to achieve. Macro economic factors, specifically the strength of the pound versus the dollar, the rising cost of oil and the slowdown in the world economy, are placing pressure on consumers' discretionary spending. Clearly tourism expenditure will slow as these trends impact on global and regional economies. Thus Scotland's tourism sector can expect a slowdown in historical growth, particularly from overseas."

He added: "In any event, the 50% growth target was established largely as a result of political ambition with insufficient analysis by sector and geographical area of the relative contributions to the growth target, set against historical and trend growth."

The target has also been questioned by Philip Riddle, chief executive of VisitScotland, the national tourism agency, who said doubling revenues was "more of an ambition than a target".

However, the Deloitte figures do reveal some positive signs for Scotland's tourism trade. According to the survey, Scottish hotels are closing the gap on competitors south of the Border. Occupancy rates at hotels in Edinburgh are among the highest in the UK, while the city's rate of revenue per room is second only to London. Edinburgh hotels achieve a revenue rate of 69 per available room compared with 109 in London.