Scotland's hotel market has remained strong despite Brexit vote worries. The first half of 2017 saw foreign investors spending over $67 million Scottish hotel acquisitions. According to Savills, this investment marks a sixfold increase, compared to the same period in 2016.
U.S.-based investors spent the most, with acquisitions totaling close to $47 million, through hotel buys in Edinburgh. Both PGIM and International Hotel Properties showed the most investment activity in the market. Some of the most notable investments the made this year were PGIM's Safestay Hostel buy in Edinburgh and International Hotel Properties' acquisition of Holiday Inn Express in Edinburgh.
Steven Fyfe, associate at Savills Scotland's hotels team, told Commercial Property Executive that Edinburgh is the most sought after hotel market in the UK outside of London. Current occupiers and investors are looking for opportunities to grow their presence in the country through size, various brands and new concepts. "The high level of demand is spilling out to locations, such as Kelso, where we are marketing the Roxburgh Hotel & Golf Course, which has seen significant interest," Fyfe explained.
Meanwhile, Indian companies' acquisitions totaled $11 million, including MGM Muthu's buy of the Highland Heritage Portfolio and Newton Hotel in Nairn. Chinese group Creation Gem International, which acquired The Isle of Eriska Hotel and Spa, Singapore's 7 Hospitality and Israel-based Fattal Hotels Group's European division Leonardo Hotels also expanded their footprint across Scotland.
According to Fyfe, the weak pound is driving the demand for Australia hotel market investment. The dropping pound gives investors an advantage in terms of exchange rates and sharp yields in prime markets and hotel owners "the opportunity to sell very comfortably just now. The beneficial knock-on effect is that purchasers of regional and provincial hotels are encountering increased competition from foreign buyers, which increases the focus on alternative hotel stock available," Fyfe stated. As the pound weakened and investment grew, acquisition yields grew to 12.5 percent in regional locations and 7 percent in key gateway cities. RevPAR also rose in the area, with regional UK RevPAR growing by 4.3 percent in year-to-date Aug. 2017, compared to the 2.9 percent increase to year-end 2016. Meanwhile, RevPAR in the regional UK area continues to grow.
As for the region's future, Fyfe predicted that Scotland's hospitality industry will continue to see success. "The UK hotel market has had a strong year so far, as the sector remains resilient to wider geopolitical headwinds," he said. "The favorable exchange rate has attracted overseas buyers that are looking for stable, long-term income."