Figures on Upswing for Hospitality
Aberdeen hospitality and room availability on rise for 2020. By Stevie Leask
Most of the time Aberdeen feels like a world of its own: it is a city that is able to attract a wide range of people, a city that people feel is the right place to bring up their children.
The biggest challenge for Aberdeen city and shire is the oil crisis – there have been many knock-on effects. However, there has always been one sector raising concern, whether or not the crisis is going to affect it. Dr Andrew Martin, lecturer in Tourism at RGU, has given some insight into what has triggered the crisis: “The dollar price coming down meant there was less need for accommodation and this has given a difficult trading environment for hotels.”
So, what does 2020 have in store for hospitality and room availability? What impact is the crisis going to have on this market?
At the beginning of the oil crisis erupting, hoteliers had a massive struggle; Aberdeen had gone from a best in class to worst in class performer. However, the sector has begun to revive itself. There has been a vast saturation in the amount of rooms available over the last five years – they have seen a huge rise, from approximately 3,000 to 10,000. Unbelievably, the figures have tripled – a struggling market has managed to show a boost in its numbers.
There are so many different reasons as to why this is happening. For example, different types of people are attracted to Aberdeen – there are so many beautiful aspects that make Aberdeen the ideal place to visit. Visitors now have the chance to stay in accessible hotels where there are different public transport lines, shopping, restaurants, and TECA and P&J Live. More visitors are attracted as they have a lot more choice of what to do around Aberdeen.
The crisis, however, led to two hotels going into administration – the Holiday Inn Express on Chapel Street and the Holiday Inn at Westhill. That was when the company behind the Albyn Bar and the Holiday Inns next to the exhibition centre put both up for sale. There were “severe cashflow problems” driven by the oil crashes, but also fierce competition between other hotels that started to appear. Both of these hotels have been put up for sale for an undisclosed sum of money. There is also a key deal taking place between the Marriot Moxy Hotel, located next to Aberdeen airport, and British Steel for £5.7 million.
The bigger branded hotels were affected by this, but also smaller chains saw themselves going into administration, including a hotel on Crown Street and one on Union Street. The motto throughout the mess this left was ‘business as usual’. However, there is beginning to be a positive aspect as “improvements in oil price and errors to diversify Aberdeen’s economy suggests a move back into positive territory for RevPAR (used to assess a hotel’s ability to fills its available rooms at an average rate) growth”.
This has been seen to put many investors in a position of uncertainty, but can they stay positive for 2020? By the sound of things, investors have a lot to look forward to in the following years. Dr Martin continues: “The future is positive but currently it is very challenging.”
It is going to be challenging due to the factor of “more competition, less business going around”. These chains of events are attracting investors
from overseas. Savills states they “recognise a window of opportunity to
acquire assets at a discount”.
Aberdeen was the only city out of 22 in the United Kingdom that struggled with the crash. However, things can only move forwards and upwards for the city, and investors have begun to see hope again.
The opening of the Sandman Signature hotel in Aberdeen, for example, sparked a vast amount of willingness amongst investors as this offered positive possibilities for them. But what has sparked this sense of hope and willingness to succeed?
One thing that has started to help this industry in Aberdeen is the opening of TECA and P&J Live, with new exhibition halls and arena. It has been seen to be a real game changer for the industry: at 48,000 square feet, its arena has capacity for 15,000, and there are seven conference halls that can hold a capacity of 5,000 people, thus meaning expansion for hospitality and room availability. This has led to the opening of two international branded hotels which have altogether 350 rooms. Due to the success of these hotels, investors have been inspired to develop their ideas, building an extra two.
To follow on from the success of the brand new exhibition centre, further development of Aberdeen Airport is also set to boost the economy for Aberdeen. It is becoming more accessible for international flights, therefore there is an increasing number of tourists, hence the need for more room availability. Could this finally be Aberdeen relying on different sectors rather than solely on the oil-and-gas industry?
Steven Fyfe, associate director in the hotels agency at Savills, said: “While there has been a historical dominance and reliance on the oil industry, there are efforts to diversify Aberdeen’s economy and this will prove positive for hotel operational performance over the longer term.”
Moreover, hospitality and room availability are going to be pushed to their limits in 2020 due to a brand-new sector, cruise tourism, being introduced to the city. The expansion of the Aberdeen Harbour is causing a lot of controversy due to the fear of it not working out. Many people believe that even if the harbour is being extended, Aberdeen will still not be able to cope or know how to deal with such expansion.
For the future of 2020, investors will not have to face this alone; VisitScotland and VisitAberdeenshire are there to help. Chris Foy, chief executive of VisitAberdeenshire, said: “With our backing, Aberdeen City Council, Aberdeenshire Council and Opportunity North East (ONE), VisitAberdeenshire promotes and helps to develop tourism businesses throughout the North East, and works closely with Scottish Enterprise to develop a range of support programmes for local businesses.”
In addition to the support of VisitAberdeenshire, there is also going to be a vast amount of support from the Scottish Government. A spokeswoman said: “We have listened to the concerns of the hospitality sector and introduced a real term 12.5% cap on rates increases for all but the largest hospitality premises.”
The future is looking bright for room availability and hospitality – Aberdeen could become one of the biggest hubs in this industry. With investors receiving backup from organisations such as VisitScotland, this industry is going to thrive.