Inverness most attractive Scottish market for hotel investors

Inverness has topped Colliers International's inaugural Scottish Hotel Index as the most attractive market for investors.

A combination of strong levels of demand, rising average daily rates (ADR), a low active pipeline, relatively low development costs and high occupancy levels resulted in Inverness pushing Edinburgh into second place.

The Index analysed five locations across Scotland and ranked them according to nine key indicators to determine the ‘hot spots' for hotel development and acquisition across the country. Inverness and Edinburgh were followed by Glasgow, Dundee/Perth (which were ranked together due to data limitations), and Aberdeen.

Inverness' overall rating of 3.79 would put it joint second in the UK Index, alongside York and behind Chester. Edinburgh is in fifth place in the UK.

Inverness showed the strongest revpar growth, up 8.5%, and had the highest occupancy rate in the Scotland at 83.2%. The city also had some of the cheapest land, alongside Dundee/Perth and Aberdeen, the smallest active pipeline at under 3% of current room supply, and relatively modest build costs. This allowed Inverness to top the table, despite being rated as having only ‘moderate investor appeal'.

Edinburgh was second with the highest hotel KPIs in Scotland and a ‘very sought after' investment location, but its high land price, considerable active pipeline and lower revpar trend kept it below Inverness for overall investment appeal.

Marc Finney, head of hotels and resorts consulting at Colliers International, said: "Our Scottish Hotels Market Index shows the changes taking place in the sector. The study in particular highlights that Inverness is not necessarily the best hotel market north of the border, but it is currently providing the best opportunities in Scotland. Inverness has recorded high levels of demand of around 80% over the past four years, which has enabled ADR to rise by 22% between 2013 and 2016. It is cheap to acquire hotel sites there, providing investors with much better value for money than, say, Edinburgh."

Alistair Letham, the Scottish director in the UK hotels agency team at Colliers International, added: "Crucially the index shows that hotel performance is on an upward trend in Inverness, and there is little new stock of guest rooms in development. Despite being expensive, Edinburgh is also on an upward trend and has one of the highest ADR in Scotland and the UK at £93 at the end of 2016. So the capital rightly deserves its position in the UK top 10."

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