Four-fold jump in Scotland’s hotel investment market

Scotland’s hotels market saw investment volumes reach more than £900 million last year, new research shows, marking a more-than four-fold increase on 2017’s total.

Edinburghs iconic Caledonian Waldorf Astoria, better known as The Caley Hotel, changed hands during the year. Picture: Ian Rutherford

The £902m spent by investors was spread across 25 individual transactions and components of ten portfolios, according to property adviser Savills. The firm’s data shows that 69 per cent of the total investment spend was accounted for by portfolios of assets while individual transactions made up about £281m in total, with an average size of £11m.

Savills said the largest transaction in Scotland in 2018 was the £85m sale of Edinburgh’s iconic Caledonian Waldorf Astoria – better known as The Caley Hotel – to Twenty14Holdings.

International parties remain the dominant investor group in the hotels market north of the Border, representing 76 per cent of the investment volumes. Within this, French investors were the most active, with £279m of deals across a mix of individual transactions and assets within a wider portfolio.

Israeli investors were also key players, accounting for £109m of sales. Other nationalities all transacting in Scotland in 2018 include Middle Eastern (9.4 per cent), US (4.3 per cent), Swedish (4.3 per cent) and Canadian (3.8 per cent).

Other key deals last year included the sale of Jurys Inn, Edinburgh, to Fattal Hotels for £52m, and Swedish investor Pandox AB buying the Radisson Blu in Glasgow for £39m.

Savills pointed out that other major hotels, including Principal Edinburgh George Street, Hilton Edinburgh Carlton and DoubleTree by Hilton Hotel Glasgow Central, all changed hands as part of wider hotel portfolio sales.

Scotland accounted for 14 per cent of all UK hotel investment transactions in 2018.

Steven Fyfe, associate director in the hotels agency team in Scotland, said: “Buoyed by strong occupancy levels from leisure tourism, the ongoing inward investment of both domestic and overseas capital into Scotland’s hotels market demonstrates the strength of the sector despite ongoing Brexit uncertainty.

“Looking ahead, there is a positive outlook for Scotland’s hotels market. In Edinburgh the W Hotel, Edinburgh St James is nearing completion, complementing a number of smaller hotels due to open in 2019/20, and there are plans for two significant hotel developments at Haymarket.

“Meanwhile, in Glasgow, we are seeing the arrival of ever more developers and hotel brands such as Motel 1, Radisson Red and Dalata.”