Scottish hotel sales double to more than £300 million as investors find ‘enduring appeal’

Transaction volumes forecast to exceed £200m in 2024 as some stability returns to market.

Scottish hotels hold “enduring appeal” for investors after transaction volumes nearly doubled last year, in part reflecting the bumper sale of an Edinburgh landmark, new figures have revealed.

The total value of hotel sales in excess of £1 million reached £310m in 2023, up 98 per cent on 2022’s figure of £156m. Overall, Scotland accounted for about 14 per cent of all UK hotel deals last year as the market remained resilient despite “ongoing economic headwinds”, the latest study from property agency Savills showed.

The firm recorded 31 transactions in 2023, most notably the sale of the landmark Waldorf Astoria in Edinburgh - better known as The Caley Hotel - for £85m to Henderson Park and Klarent Hospitality, reflecting a sizeable 27 per cent of overall volumes. Other key deals saw the sale of Mar Hall, Renfrewshire by EY Parthenon to Dubai-based Dutco, which was marketed at a guide price of £12m.

Last summer saw Edinburgh’s landmark Caledonian Waldorf Astoria - better known as The Caley Hotel - change hands in the biggest deal of its type in 2023.

In terms of buyer profile, Savills noted that 77 per cent of purchasers last year were UK investors, an increase on the 63 per cent seen in 2022. Property experts said that often these locally based buyers “appreciate the nuances of sub-markets” and understand where they are able to “add value and make a positive impact” to existing hotels and their communities. The additional 23 per cent of capital came from locations including South Africa, the UAE, Singapore and the Republic of Ireland.

Looking at the remainder of 2024, Savills believes confidence will continue to return to the market with a number of sale processes already underway. It also pointed to several “highly anticipated” openings and up to 678 rooms in development, including Red Carnation at 100 Princes Street and the Hoxton, both in Edinburgh. Scotland’s capital is, therefore, expected to remain the highest performing hotel market outside of London in 2024.

Steven Fyfe, hotel capital markets director at Savills Scotland, said: “While 2023 was challenging, we saw 72 per cent of all transactions take place in the second half of the year, demonstrating the enduring appeal of Scottish hotels despite a difficult market. We are already seeing stability return with a strong start to 2024.

“Key events this year, including the Six Nations, Taylor Swift playing three dates at Murrayfield in June and the growing number of people attending the Fringe and summer festivals will no doubt see visitor numbers rise. With all this in mind, from an investment perspective, we should see transaction volumes exceed £200m by the end of the year.”

Other key deals included the sale of Mar Hall in Renfrewshire by EY Parthenon to Dubai-based Dutco.

Last year, Edinburgh maintained the UK’s top spot for hotel development while Inverness and Glasgow joined the top ten rankings. Property firm Colliers’ hotel market index analysed the performance of 38 UK cities across ten performance indicators including occupancy figures, average daily room rates, RevPAR (revenue per available room) growth, development costs, land prices and market appetite.

The index compared 2022 data against 2019 and included Inverness for the first time, which went straight into position six, while Scotland’s largest city, Glasgow, climbed ten places to eighth position. The report noted that, in recent years, leisure markets have been leading the pack as the industry recovers from pandemic closures and tiered re-openings, although with business travel returning city centre locations also made a strong return in 2022.

Siddhika Shah, associate director in the Colliers hotels department, said: “Investors are already interested in the Scottish market, and we are seeing a solid interest in hotel development in Glasgow, which has a strong active pipeline to replenish the city’s aging stock.”

Last summer saw Edinburgh’s iconic Caledonian Waldorf Astoria change hands in the biggest deal of its type in 2023, understood to be in the region of £85m. The acquisition by property fund manager Henderson Park, together with its in-house hospitality operator Klarent Hospitality, came after the famous establishment, located at the west end of Princes Street, was bought by Abu Dhabi-based Twenty14Holdings for a similar sum of money in 2018.

Completed in 1903, the five-star 241-room hotel is an A-listed building with an iconic red sandstone façade. It boasts a long list of famous former guests having hosted Her Majesty the late Queen Elizabeth II and former US President Barack Obama, as well as Hollywood legends including Laurel and Hardy, Judy Garland, Charlie Chaplin and Sir Sean Connery. The hotel takes its name from the Caledonian Railway Company, the original owner of the building.

Towards the end of last year, Saudi Arabia’s sovereign wealth fund took a sizeable stake in Sir Rocco Forte’s luxury hotels group, owner of Edinburgh’s landmark Balmoral, at the opposite end of Princes Street to the Caley. The hotel group agreed to sell a 49 per cent stake to the fund in a deal thought to value the owner of the five-star Balmoral and Brown’s hotels at around £1.2 billion. Rocco Forte Hotels said Saudi’s $700bn (£552bn) Public Investment Fund (PIF) was snapping up the significant minority stake and aims also to invest in the group to help it expand further worldwide.

Founders Sir Rocco and his sister Olga Polizzi are keeping a 51 per cent stake in the company and remain as executive chairman and deputy chair respectively, but Italian sovereign wealth fund CDP Equity sold its entire 23 per cent shareholding as part of the deal. The Rocco Forte stake purchase adds to the fund’s existing interests in luxury hospitality, having already bought minority stakes in hotel groups Aman Resorts and Habitas in 2022.

Edinburgh named UK’s top spot for hotel development: two Scottish cities join top ten