Rising costs are top worry for Scotland’s hotel sector

● Higher running costs key concern for hoteliers ● Experts predict city centre hotels will be hit hardest

Leading figures in Scotland’s hotel sector are braced for the impact of rising costs amid sustained economic uncertainty, suggests a new report.

Despite enjoying recent growth, the hotel industry faces an increase in operating costs caused by inflation, business rates, staffing and online travel agency (OTA) fees, according to research conducted by Addleshaw Goddard at its inaugural Scottish Hotels Conference.

Almost half of the survey’s respondents prioritised higher costs as their top concern, ahead of an economic downturn (25 per cent), staffing issues (13 per cent) and political uncertainty (13 per cent).

The law firm cited the hotel sector’s “huge” reliance on consumer confidence as a key driver of these concerns.

Participants identified “underinvested city centre hotels” as the most likely to suffer from an economic downturn, rather than country, luxury or budget hotels.

Nevertheless, Scotland’s hotel industry continues to experience significant growth thanks to record numbers of tourists, as the “Outlander effect”, the launch of Route 500, the V&A and various sporting competitions attract visitors to Scotland.

As a result, more than threequarters of industry experts identified the importance of air routes as key to the continued growth of the sector.

The sector also recognised the positive impact of the oil and gas sector recovery, with 52 per cent citing Aberdeen as the city most likely to see the highest Revenue Per Available Room (REVPAR) growth in the next 12 months. This was followed by Inverness (17 per cent), Edinburgh (13 per cent) and Glasgow and Dundee (9 per cent).

Addi Spiers, business support and restructuring partner at Addleshaw Goddard, said: “Scotland’s hotel sector is riding a wave of growth. While the outlook is generally positive, experts have shone a light on a number of challenges facing the industry.

“Rising costs outwith the control of the industry are causing significant worry, with fears that hoteliers may have to pass on additional costs to the customer. This could negatively impact the number of bookings for many, with upper and upper midscale hotels in cities predicted to be hit the worst as customers trade down.

“In the event of an economic downturn, this impact would be magnified and could be catastrophic for some. Given the current political and economic uncertainties facing the UK, it’s easy to see why rising costs are such a concern.

“The industry is hugely affected by consumer confidence, so Brexit negotiations and uncertainty will affect the sector well into 2019 and beyond. Many will be looking to the Scottish Budget later this year in search of a respite against rising costs.”