Plunging oil prices takes massive toll on Aberdeen hotels

Plunging oil prices reaped a massive toll on Aberdeen's hotels in 2015, dragging down average performance measures for the Scottish industry as a whole.

The downturn in oil prices is affecting the city's hospitality sector. Picture: Ian Rutherford
The downturn in oil prices is affecting the city's hospitality sector. Picture: Ian Rutherford

The dramatic collapse in activity in the Granite City tempered an otherwise positive year for the industry, with a “marked division” between the North-east and other parts of the country. Occupancy and revenue levels remained resilient in Edinburgh, Glasgow and Inverness, according to annual figures compiled from the monthly hotel trends survey by accountancy firm BDO.

Edinburgh had the fifth-highest revenue of any city outside London last year, while Glasgow ranked third in occupancy after Chester and Southampton. Edinburgh, Glasgow and Inverness were all well ahead of UK, English and Welsh averages for both revenue and occupancy.

But Aberdeen fell in the rankings as occupancy levels dropped by 18.5 per cent on the previous year to 64 per cent, well below both the Scottish and UK average. Revenues in Aberdeen tumbled by 22 per cent on the industry’s standard measure of rooms yield.

Alastair Rae, partner in hospitality and leisure at BDO, said those figures skewed the Scottish averages as overall occupancy dipped by 0.9 per cent to 76.1 per cent. Revenues throughout the country were 2.2 per cent lower at £51.65.

But the decline in Aberdeen was also partially because it was “from such a great height”, Rae added.

“Despite a 22 per cent revenue fall year-on-year, Aberdeen still has a higher figure at £53.60 than Glasgow at £51.82,” he said. “This reflects the very rarefied market that Aberdeen occupied prior to the fall in oil price.

“There are some signs of stabilising in the oil price so I would expect the downward curve in the occupancy and revenue in Aberdeen to reduce somewhat as the market comes to terms with its new operating environment.”

In Edinburgh, revenue was up 0.5 per cent on the previous year at £60.27, with an increase in occupancy to 80.4 per cent. Revenue in Inverness rose by 4.3 per cent to £55.26.

Occupancy in Glasgow edged slightly higher to 81.6 per cent, though revenues eased by 0.1 per cent in the wake of a strong 2014 bolstered by the Commonwealth Games and Ryder Cup.

Looking ahead, Rae said many hoteliers across the wider market anticipate steady and improving profitability in the current year, but “not exceptionally so”. He added: “The hospitality sector is prone to the broader economic mood, which still seems slightly uncertain at present.”