Investment in Scottish hotels pushes £200m after 60 per cent year-on-year rise

The consultancy firm said total value of hotel deals soared across the whole of Scotland last year, as overseas investors took advantage of the weak pound to acquire prime assets at competitive prices.

In terms of geography, the firm reports Edinburgh saw the highest volume of hotel investment in the year of all the Scottish cities, accounting for 64 per cent of all Scottish transactions totalling more than £117m, a 58 per cent increase on 2016 volumes.

The strong activity places Edinburgh ahead of both Birmingham and Liverpool to become the second largest target city outside of London in 2017, in terms of hotel investment volumes, after Manchester.

Savills said the Brexit vote, which precipitated a dramatic plunge in the value of the pound, had led to a huge increase in the level of investment by international buyers which was seven times greater in 2017 than transacted the year before, at £57.4m.

According to Savills, US investors drove most of the hotel investment from overseas last year, followed by finance from Singapore, India and Hong Kong.

Among landmark deals carried out in Scotland last year were the sale of boutique hotel The Bonham in Edinburgh, which was offloaded by Starwood Capital to a US investment firm led by fund manager Richard H Driehaus.

The level of interest in Scottish hotels highlights a wider national trend that sees the asset class at the top of the investor’s wish list, Savills noted, with strong appetite amongst both domestic and overseas sources.

According to the firm’s research investment into the UK hotel market reached £5.4 billion across 219 deals in 2017.

This total represents an increase of 32 per cent from 2016, in which levels totalled £4.1bn and is 51 per cent above the 10 year average of £3.6bn.

Savills stressed that as well as overseas investment, domestic buyers were still active in the market last year and remain so in the early part of 2018.

The Scotsman Hotel was acquired in 2017 by Stefan King’s Glasgow-based G1 Group, while Steven Fyfe, an associate in Savills’ hotel team, said domestic players were among the bidders for two unnamed hotels the firm has just sold.

“They are still active, but you will have seen with the Caledonian in Edinburgh, that was an overseas investor looking for a trophy asset,” Mr Fyfe said. That was a recurring theme throughout 2017.

He added that, while activity in Scotland was focused last year on Edinburgh, where Savills advised on the sale of the Courtyard by Marriott, the market was buoyant across Scotland.

Investment into Glasgow in 2017 more than doubled – rising from £16.8m in 2016 to £35.79m, Savills figures show, while both Dundee and Aberdeen saw encouraging increased year on year investment volumes (totalling £5.5m and £5.7m, respectively).