Oil price recovery and major infrastructure projects reaching fruition are boosting Aberdeen’s hotels sector with a resurgence of investor demand and the arrival of new hotel operators, according to international real estate advisor Savills.
In its Aberdeen Hotel Spotlight, Savills suggests Aberdeen will see RevPAR (revenue per available hotel room, year on year) move into positive territory in the second half of 2018 for the first time since 2014. The firm describes RevPAR as hitting ‘rock bottom’ in Q1 2016 as a result of a fall in both average room and occupancy rates that followed the oil crash however, the city’s hotel industry is benefiting from the steady recovery and a positive outlook for further oil price growth.
Adding to this Savills outlines major infrastructure projects currently underway in Aberdeen that hoteliers are prospering from. The city has turned its attention to sustainable investment in renewable energy through the development of the £335 million Aberdeen Offshore Wind Farm (EOWDC), with the first of 11 turbines having been installed in April 2018. Efforts are also firmly in place to increase Aberdeen’s conference and leisure offering. Savills says there are already 50 golf courses located in the area and the new Exhibition and Conference Centre (AECC), due to open in 2019, is expected to attract 4.5 million visitors in its first six years. Complimenting this is the £20 million expansion to Aberdeen International Airport, increasing terminal capacity by 50% upon completion in 2019, and the £350 million expansion of Aberdeen Harbour.
Steven Fyfe, associate director in the hotels agency at Savills, says: “While there has been a historical dominance and reliance on the oil industry, there are efforts to diversify Aberdeen’s economy and this will prove positive for hotel operational performance over the longer term.”
As a result, Savills says room count in the city is expected to increase by 10% by the end of 2019 (up from 6,867 rooms according to AMPM figures), with a number of new hotel openings and, in particular, the arrival of new branded hotels in a market largely formed of independent operators. New openings include Sandman Signature Hotels opening a third UK hotel on St Andrews Street at the end of May 2018 and a 200-room Hilton Hotel.
The improving outlook for Aberdeen is attracting evermore investor interest, particularly from overseas, who recognise a window of opportunity to acquire assets at a discount. Hotel investment volumes in the city totalled £12.25 million in 2017 across three deals, following a year of inactivity in 2016, and Savills suggests this trend will continue to build momentum in 2018.
Key deals include the sale of the ground lease investment of the Marriot MOXY hotel, next to the International Airport, to British Steel for £5.7 million, and The Holiday Inn in Westhill and Holiday Inn Express on Chapel Street to Cairn Hotels for an undisclosed sum.