Edinburgh tops UK regional rankings for hotel investment

Edinburgh has again been named the UK's top hotel investment destination outside London, although hotels in Britain are being urged to take action to lessen the impact of several hurdles, a new survey has found.

The capital has scooped the title for the fifth year in row. Picture: Lisa Ferguson.

The 2018 European Hotel Investment Survey from Deloitte said the Scottish capital was, for the fifth year in a row, named the most attractive UK regional city for hotel investments in the next 12 months, according to 39 per cent of respondents.

Edinburgh, along with Cambridge in second place and Manchester in third, is expected to see the highest growth regionally in revpar (revenue per available room) in 2019.

London was ranked the second most attractive hotel investment destination in Europe, gaining votes from 24 per cent of respondents, climbing back from fourth in 2017 and sitting behind Amsterdam at 34 per cent.

The UK capital’s rise comes despite 70 per cent of respondents saying that the UK is at a “peak” or “downturn” in its investment cycle. In contrast, France, Greece and Spain are deemed by investors to be on the up.

The majority of hotel ­investors were found to be optimistic about 2019 growth prospects in the regional UK hotel market, with 52 per cent of respondents expecting revpar growth to be between 1 per cent and 3 per cent across the UK, although this is down from 70 per cent last year. However, hotel investors were less confident when asked about 2019 expectations for gross operating profit per available room (goppar). One in four respondents expects goppar to enter negative ­territory in London over the next 12 months, while about a fifth expect negative goppar in the regional UK.

Nikola Reid, director and head of UK hospitality at Deloitte, said: “The majority of hotel investors anticipate continued revpar growth in the regional UK in 2019. However, one only has to scratch away at this surface to reveal clear concerns and intensity in operational cost pressures caused by inflation, staffing challenges and Brexit uncertainties.”

Lack of economic growth was identified by 38 per cent of respondents as the top strategic risk facing the European hotel industry over the next five years. Reid added: “With significant headwinds to profitability, UK hotel owners and operators will need to continue to be more innovative with efficiency and productivity to preserve the bottom line whilst having to adapt to ever changing consumer habits and value expectations.”