Struggling hotels forced to cut prices

Published on Wednesday 10 March 2010 20:32

SCOTLAND'S hotel sector started the year with the weakest performance of anywhere throughout the UK, reversing a relatively solid period during 2009.

Both occupancy and revenues fell in Scotland during January, according to the latest monthly survey of the sector by accountancy firm PKF. The figures suggest that hoteliers are being forced into deep price discounting to maintain the minimum occupancy levels needed to ensure efficient operational performance.

Occupancy in Scotland's hotels was 1.5 per cent lower than during the same period a year earlier, compared with the 0.7 per cent dip recorded across all of the UK regions. Scottish hotel revenues by the rooms yield measurement dropped 6.8 per cent, versus a decline of just 4.8 per cent for UK hotels outside of London.

Up until January, the Scottish hotel sector had generally outperformed that of the rest of the UK throughout the economic downturn.

Alastair Rae, partner in hospitality and leisure at PKF, said he would not read "too much" into a single month's figures, particularly given the extremely cold weather at the beginning of the year. January is also traditionally one of the slowest trading periods for the sector.

However, he added that he was taken aback by the findings: "I am a little surprised in that it seems to be a reversal of what we were seeing at the end of last year, with Scotland performing relatively well in difficult conditions."

Glasgow staged a rebound, with occupancy levels 7.5 per cent higher than in the same month a year earlier, and rooms yield down by just 1.9 per cent.

Rae said it would be good news if the Glasgow sector was able to maintain such momentum, as the city "hasn't had a great run of it recently".

Occupancy in Edinburgh was 0.3 per cent higher than a year earlier, but rooms yield fell by 4.1 per cent. In Aberdeen, where uncertainty over future government taxation of the dominant oil industry is slowing business activity, occupancy and rooms yield were 7.3 per cent and 13.9 per cent lower respectively.

The survey also showed that the budget end of the hotel market is continuing to thrive. Occupancy in the UK budget sector rose 13.9 per cent in January, while the rooms rate was 6 per cent higher.

Rae said the figures showed that discounting to maintain occupancy remained a feature of the sector "as the economy creeps from recession".

"Leaving rooms empty with full capital costs and staffing levels makes no sense, so clearly many hoteliers are reducing the cost of their rooms to maintain footfall," he noted.

Rae said February was likely to be another tough month for the Scottish sector, with the prolonged cold spell continuing to take its toll. He expects activity to begin picking up with the onset of spring.