Oil slump triggers fall in hotel stays
Figures come amid warnings of drop in North Sea investment
ABERDEEN’S hotel industry is feeling the impact of the slump in the price of oil with city centre hotel bookings showing big profitability falls.
It is just below that of Glasgow at 63.4 per cent, down 2.8 per cent on January last year, as corporate overnight stays dwindle. Industry body Oil & Gas UK has warned that annual investment in projects will fall from a record £14.8 billion to £2.5bn by 2018.
HOTELS in Aberdeen are being hit by the downturn in the city’s oil and gas sector with hotel occupancy down nearly three per cent year-on-year.
Monthly market research tracking city centre hotel performance across Scotland reveals modest overall growth in Glasgow and Edinburgh and a continuation of decreasing profitability for Aberdeen hoteliers in January.
In Aberdeen, occupancy was marginally below that of Glasgow at 63.4 per cent, down 2.8 per cent on January last year, as the troubled oil and gas sector continues to weaken corporate demand.
It comes amid warnings from the offshore industry body, Oil & Gas UK, that annual investment in projects like bringing new fields into production is set to fall from a record £14.8 billion in 2014 to just £2.5bn in 2018.
The Scottish Intercity Report, by LJ Research, also found that income from hiring out hotel rooms in Aberdeen was down for the first time in two years in January, with the average room sold for £96.72 per night. This was down 2.9 per cent compared to January 2014.
The weak room revenue performance combined with a decrease in occupancy to reduce “Revenue per Available Room”, the hospitality industry’s main performance measure, to £61.31. However, this remained above levels in Glasgow and Edinburgh, which were £37.81 and £43.64 respectively.
Sean Morgan, managing director at LJ Research, said: “2014 was a remarkable year for tourism across Scotland and it is perhaps quite surprising to see rather muted hotel performance in Scotland’s three key cities to start the year.
“Whilst the trend of steeply falling oil prices appears to have abated, our LJ Forecaster results highlight challenges impacting on North Sea oil and gas production and looking to the next few months there are indications of decreasing accommodation demand in Aberdeen. Serviced apartments have been identified as a particularly strong performer this month with operators in Edinburgh starting the year buoyantly.
“It will be interesting to see how performance pans out; this will enable better understanding of the extent of the positive momentum from 2014.”
The Oil & Gas UK report found that the UK North Sea industry spent £5.3bn more than it got from oil and gas sales last year, the worst result since the 1970s.
Tom Greatrex MP, Scottish Labour’s Shadow Energy Minister, said: “This year’s activity report highlights just how serious the situation is for the oil industry in the North Sea. It is vital to the Scottish economy and nobody can now doubt it needs support.
“These findings underline the need for urgent action to ensure the fiscal framework is appropriate for North Sea oil and investment.
“Postponing action until the Budget is a needless and damaging delay. If the Tories do not improve the tax regime, Labour will.”
Chancellor George Osborne said he will meet Oil & Gas chief executive Malcolm Webb and other industry leaders tomorrow to discuss what action is needed to secure the success of the sector.
He added: “While the huge fall in the oil price has been a real benefit to the British economy, it’s been a challenge for the North Sea oil and gas industry. We’ve got record investment in the North Sea, and there’s a lot of oil still in there. We want to continue to maximise investment in the North Sea to make sure it continues to provide jobs and economic benefits to the whole of the UK. The North Sea is a great national asset and we will do everything to protect it.
“I’ve already cut taxes in the North Sea and we’re now looking at what more we can do to work with industry to support investment in this important sector.”