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Royal Bank of Scotland | Corporate & Commercial 1

Trends in the UK hotel sector

Summer 2015

Corporate & Commercial

NatWest | Corporate & Commercial 32 NatWest | Corporate & Commercial

As we enter the third quarter of 2015, it’s clear that the hotel and hospitality sector continues to thrive. So far this year, the industry has seen increases in the key metrics of occupancy rates and RevPar (revenue per available room). These figures have undoubtedly been bolstered by the many different reasons why people need to stay in British hotels – whether they’re inbound visitors or travelling in the country. Whether it’s tourism, corporate events, people visiting family, or sporting events, there are many reasons for the need to stay at hotels and this trend will bolster demand into 2016.

This is a vibrant industry that hasn’t rested on its laurels, as it continues to innovate and transform. This year so far we’ve seen a number of large hotels tune up services for non-guests, such as quality restaurants, spas and bars, and, of course, high-end corporate conferencing. The net result is that many hotels now appeal to different types of visitors, and are able to see different parts of their business generate their own revenue stream.

While there is reason for optimism, the sector isn’t immune to shocks. The collapse in the oil price has badly

Contents

Introduction ..................................................................................... 3

2015 H2 outlook ............................................................................ 4

Turn up the heat on energy efficiency ...................................... 6

Regional analysis .....................................................................8-15

London and the South East ............................................ 8

The Midlands ...................................................................10

The North of England ....................................................11

The South West and Wales ...........................................12

Scotland ............................................................................14

Contact us. ....................................................................................16

Introduction

affected visitor numbers in Aberdeen, for instance, and with Iran producing oil again, prices may stay low for some time. Although the effects have barely touched other parts of the UK, it’s an illustration of how over-reliance on one type of revenue stream can expose a business during tough times.More generally, the potentials for technology continue to present opportunities and risks. For those hotels that can keep up with advances, the advantages of implementing mobile-friendly procedures for checking in, checking out and payment won’t fail to excite. The appeal to non-English-speaking visitors to interact in such a way would provide an obvious boon to demand.

At the other end of the scale, smaller operators may question whether, with reduced economies of scale, the higher costs for investing in these systems will be outweighed by increased revenue.

Online booking, however, remains an industry hot topic. Online travel agents (OTAs) continue to strongly influence the prices that hotels can quote, the terms of competition for pricing and the cut of room rate price that both agent and hotel receives. Notably,

Booking.com issued new price parity agreements in July, preventing hotels it deals with from advertising rooms at lower rates on their own websites.

Jackie Grech, legal and policy director at the British Hospitality Association, said at the time: “We all want the same thing: a competitive and innovative market for hospitality and tourism. Narrow rate parity misses the mark in aiding that goal.” While there was substantial criticism from the industry about Booking.com’s move, it remains to be seen whether other OTAs will follow suit and what the cumulative effects will be on the sector. Overall, this is an interesting and dynamic sector, in which we’re heavily involved and continue to support.

I hope that you’ll find this report useful. If you have any comments or questions, please email us at [email protected] or contact your relationship manager.

Yours sincerely,

Andrew Taylor, Head of Leisure, Retail & Franchise


The first half of 2015 saw continued growth in the UK’s GDP and employment rates, albeit at a slower pace than occurred last year.

Interest rates have remained low and falling oil prices have nudged 2015 GDP forecasts up to 2.5%. The outcome of the General Election on the 7th of May provided some certainty for businesses, but the prospect of a referendum on EU membership adds an element of unpredictability over the next two years.

Against this backdrop, the UK’s hotel sector celebrated another strong year in 2014, with growth across the board in all the key metrics: occupancy, average daily rate (ADR) and RevPar (revenue per available room). Both London and the regions experienced

solid growth, with occupancy up a full 3% and RevPAR up nearly 7% on 2013 levels in the regional market.

PwC’s hotels forecast for 2015 estimates an overall 5.6% gain in RevPAR for UK hotels to £67.39, driven by a 4% rate growth to £86.49, and a 1.6% increase in occupancy to 78%. This positive outlook is boosted by several factors, including the hosting of Rugby World Cup matches in the autumn. According to ES Group’s winter 2014 Market Update – Hotels, the UK hotel transactions market has remained buoyant. The report shows that regional sales represented the majority of transactions in the last six months of the year, with continued demand coinciding with further improvement in trading performance across the regions.

Interest rates

Borrowers in the hotel market continue to benefit from low interest rates, but the question in the back of many borrowers’ minds will be when will rates begin to rise, by how much and how quickly. The outlook remains

2015 H2 outlook

Throughout the second half of the year, the UK’s hotel and hospitality industry can expect to benefit from continuing economic growth and strong visitor numbers.

changeable, with original expectations of a rate rise in August 2015 now pushed back to February 2016 on the back of deflation, sustained fiscal policy tightening, elevated political risk and weaker external demand.

The current Royal Bank of Scotland forecast is for a 25 basis point (bps) rise in the bank rate in February 2016 followed by a second 25bps rise in May 2016, settling at 1.25% by the end of 2016.

According to VisitBritain’s statistics (May 2015), visitor numbers remain strong, with the EU leading the charge. The number of visits to the UK by overseas residents in the 12 months to April 2015 was 34.6 million – an increase of 4% compared with the number of visits in April 2014, according to the Office for National Statistics (ONS).

In the 12 months to April 2015, visitors to the UK from the EU-151 rose 11%, while numbers from North America were down 15%.

During the same period, business trips increased by 18%, holiday visits by 6% and visits to friends or relatives by 4%.

Employment

Another positive for parts of the economy is the impact of lower oil prices, as well as strong consumer demand. These are expected to be underpinned by improved employment trends and a moderate pick-up in wage inflation. Last year saw the fastest employment growth in the UK since the late 1980s, so some relative moderation is likely in the latter half of 2015.

The hotel industry has also grown in recent years and, according to the ONS’ UK Labour Market report (July 2015), employment in the UK tourism sector grew at 5.4% between 2009 and 2013. This is nearly double the rate for non-tourism industries of 2.4%, and, as of March 2015, there are 2.5 million people employed in the accommodation and food services sector.

Accommodation services grew by 7.1% in the period (an increase in employment of 23,900).

Challenges Despite the widespread optimism, the UK hotel industry still faces challenges. The uncertainty around the referendum on Britain’s membership of the EU before the end of 2017 may well test corporate confidence, leading to a postponement of capex projects and hiring. Nevertheless, Royal Bank of Scotland economists’ central assumption is that GDP growth will return to a trend-like pace over the course of 2016, with a forecast GDP growth of 1.9% in 2016 as a whole.

From a macroeconomic and fiscal perspective, the main theme to emerge from July’s Budget was the continuation of the ‘tax-light’ recovery. The government has confirmed a more severe, persistent squeeze on public spending, which emphasises how the risks are skewed towards ongoing accommodative monetary policy.

For hotels in particular, the key challenges remain the costs of doing business. From keeping up to date with regulations and taxes to keeping ahead of the competition and retaining customers, hoteliers still have a tough job ahead of them.

It’s no secret that the costs of running a business are constantly under pressure, with energy costs remaining one of the main concerns. And, with the Energy Savings Opportunity Scheme (ESOS) regulations coming in from this year, hoteliers of all sizes should and will be more aware of the risks and hopefully the opportunities.

Online Travel Agents (OTAs) will also remain a tough topic, but are increasingly being seen as a necessity. Operators need to learn what works best for them, and how best to work with OTAs – which, it’s safe to say, aren’t going anywhere. Technology is another factor always on the horizon, with opportunities for innovation key to staying ahead of the curve.

The leisure industry as a whole has a history of recovering at a faster rate than overall GDP. And although we should never be complacent, the hotel industry is certainly painting a positive picture for now.

34.6mThe number of visits to the UK by overseas residents in the 12 months to April 2015

Borrowers continue to benefit from low interest rates, but the question in the back of their minds will be when rates will begin to rise, by how much and how quickly

1 EU-15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the UK.


Energy has long been a hot topic in the leisure sector. And, with new legislation coming into force and the ongoing need for sustainable energy, it’s likely to stay high on the agenda for the foreseeable future.

As the fourth largest industry in the UK, the hospitality sector has annual energy costs in excess of £1.3 billion, resulting in carbon emissions of more than 8 million tonnes a year, according to the Carbon Trust.

Heating accounts for over 40% of energy costs for hotels, with hot water accounting for the next highest share, followed by catering, other sources (including air conditioning) and then lighting.

Clearly, hotels need to be supported in becoming more efficient and ensure their energy security for the future. Money saved on energy goes straight to the bottom line, which makes businesses more competitive. The implementation of simple energy efficiency measures can also increase levels of staff and customer comfort as well as improving general morale.

Turn up the heat on energy efficiency

Racking up annual energy costs of £1.3 billion, the hospitality sector has much to gain by saving energy, with considerable benefits for the bottom line as well as for the environment.

Legislation is another reason businesses should concentrate on energy efficiency. By the end of 2015, leisure businesses that meet certain thresholds will need to comply with the Energy Savings Opportunity Scheme (ESOS). This mandatory EU legislation requires businesses that meet certain criteria to undertake an energy audit or equivalent.

The aim of the scheme is to identify cost-effective energy savings for large undertakings in the UK – although the implementation of the recommendations is voluntary.

A closer look

We’ve been aware of energy efficiency concerns for a number of years. We’re working with our consultancy, advice and legal protection partner NatWest Mentor to help customers reduce their energy costs. NatWest Mentor’s energy audits are designed to help businesses that spend £10,000 a year or more on energy to review their energy use. The audit typically looks at three key areas:

• energy efficiency: reviewing lighting, heating, cooling, refrigeration, building fabric, plant and equipment;• tariff management: examining tariff type, rates and fuel-switching opportunities;• renewable energy: identifying ways to potentially create your own energy through solar, wind and biomass.

In particular, solar and biomass solutions are becoming increasingly popular. Our energy and leisure relationship managers work closely together to help businesses identify the right solutions to help them become more energy efficient, ultimately to help them save costs.

Recently, we supported Harbour Hotels in assessing their energy use, with an estimated saving of around 20%. The group includes five coastal hotels, one city boutique hotel and two wedding venues.

Christopher Priest, leisure relationship director in Chandlers Ford, says: “We’ve supported the Harbour Hotels group to achieve their significant growth ambitions over the past three to four years. During this time we introduced our colleagues from NatWest Mentor, who explained how their energy service could help identify cost savings to the hotel group. The audits identified a potential 20% saving in energy costs across the group, with a number of proposed improvements having a positive impact on the day-to-day running of their business.”

Mike Warren, managing director at Harbour Hotels, says: “We had been looking at energy efficiency previously – but not to the extent that the NatWest Mentor energy audit examined it. The report covered everything from heating, lighting, and the installation of new boilers through to just introducing some best practice.”

The hotel group was given a detailed assessment looking at a number of ways in which it could cut down on energy use. Suggestions ranged from short-term solutions such as switching to energy-efficient lighting and assessing draughts let in by automatic doors, to more long-term solutions like the installation of renewable-energy facilities including, potentially, biomass boilers or solar panels.

Mike adds: “Renewable energy isn’t something we had considered before, but hearing the opportunities really opened my eyes to some of the potential we hold here.”

Give and take

Although energy efficiency may not be the top of your agenda, for many businesses it can prove vital in remaining competitive and staying on the right side of EU regulation.

In addition to financial and customer service benefits, there are social and environmental advantages to reducing energy consumption, such as helping to minimise the impacts of climate change. A number of surveys have shown that customers can be more inclined to choose a hotel that doesn’t damage the environment – and some are even prepared to pay a premium to ensure this.

Businesses in the tourism industry have the opportunity to increase their profits by reducing energy use, and it doesn’t have to be at the expense of a quality experience. Improving how energy is managed and reducing energy waste can have a significant impact on profitability, regardless of the size of your business.

Tourism and hospitality businesses make a large contribution to the UK’s economy, but they still face a number of challenges in remaining profitable in the current environment. Knowing how to manage energy consumption is one way in which you could reduce your operating costs and grow further.

40%Heating accounts for more than 40% of hotels’ energy costs


Across London and the South East, the more focused and targeted hotels have continued to flourish, and more established brands have had to react.

An example of the former is the design-led Ace Hotel in London, which is aimed squarely at the younger generation, and winning international appeal. Rather than replicating the more stuffy elements of traditional four-star hotels, it aims for cool and trendy while also projecting a sense of fun.

These new hotels have matched the departure from formality with a geographical departure from the capital’s usual hotel hotspots, with locations in places such as Hoxton, Shoreditch, King’s Cross and Stratford.

Established brands have responded in several ways: they’ve turned their check-in areas from impersonal lobbies into social hubs, where passers-by can drop in for a coffee or meet friends and colleagues during the day or evening. They’ve also improved the catering side of their

London and the South East

London’s hotel scene has proved resilient, diversifying its offering and expanding beyond the usual hotspots, while occupancy levels across the region have remained strong.

business, with high-calibre chefs operating restaurants that’ll draw in plenty of non-residents as well as guests. A prime example is the Autograph Collection by Marriott, which has a hotel in the City.

This shift in offering is due to hotels treating food and beverage (F&B) as an independent part of the hotel, and an expectation that F&B should be a strong contributor to underlying profit. The London EDITION in Fitzrovia is as popular for its award-winning Berners Tavern as it is for the hotel. Plenty of people who use the restaurant may never stay at the hotel, confirming the trend that F&B is no longer just about servicing guests.

Some hotels have also sought to innovate by utilising their rooftops and turning them into bespoke terraces. This has been spurred by the market premium for space in London, relaxed planning laws and a fashion for creating vistas of London’s evolving skyline. The Mondrian London Hotel on the South Bank is a notable example.

Unique offerings

While we’re seeing an increasing number of guests who desire something unique – and are willing to pay for it, London offers options to every type of customer. Plenty of visitors still crave the consistency of a larger brand and this sector of the market remains strong.

Recent concerns around starvation of capital expenditure in the regions have been less pronounced in London and the South East. Strong occupancy levels during the downturn have driven investment across the region through the business cycle, and levels continue to rise. In Maidstone and Reading, for example, it went up by 3.1% and 2.2% respectively over

the 12 months to May 2015, while RevPAR (revenue per available room) saw more impressive growth of 9.0% and 8.3%.

Investors from all corners of the globe see London as a safe market in which to place capital. This has resulted in increased sales multiples and asset rises, and plenty of investors value London for its scarcity factor. The natural worry is that the area will see overcapacity, and there has been a debate about how many new hotels London can support. Although it’s too early to provide an answer for the long term, where rooms have been added occupancy rates have been maintained.

Over the next few years, improved transport – and the launch of Crossrail in particular – will boost hotels across the region and not simply in the centre of London.

Andrew Lancaster, Regional Head of Hotels [email protected]%

Maidstone in Kent saw RevPAR grow by 9% over the 12 months to May 2015


As the economy improves, the hospitality and hotel sector in the Midlands continues to benefit from a return to confidence, whether that’s for guests seeking leisure breaks or from demand among corporates. This has been reflected in improved rates measuring occupancy, average room rate prices and RevPar (revenue per available room), which have all shown year-on-year increases over the past three years. RevPAR in Coventry, for example, shot up by 11.9% over the 12 months to May 2015, while in Nottingham it was up 11.1%.

Coming out of the recession, there was understandably a slowdown of supply in the regions, predominantly among smaller operators. Many of these unbranded hotels have reported that their guests have chosen instead to stay at bigger, branded hotels, whether in the leisure or corporate trade. In turn, the bigger hotel chains have accelerated this trend by improving their building stock and offering more quality services to customers.

The change in offering has been reflected by corporate guests becoming more particular about the hotels they stay in. Employees at the

executive level have a greater say in their choice of venue, and the trend is to opt for large, chain hotels and newer properties due to brand loyalty and awareness.

In Birmingham, significant investment in infrastructure, such as the £600 million improvements to Birmingham New Street Station, the Grand Central shopping centre and HS2, is a further incentive for new hotels to emerge in the city and for existing ones to renovate. Given the attraction and investment opportunities the city presents, investors are understandably keen to capitalise on the area’s success.

Airport improvements

The sustained conference trade at Birmingham NEC and runway improvements at Birmingham Airport remain firm.

Outside Birmingham, developers are also benefiting from the Business Premises Renovation Allowance (BPRA) scheme, which offers 100% tax relief on projects that convert or improve empty business premises. Hotels in Coventry, Wolverhampton

It’s no secret that the north of England continues to see a buoyant hotel market. The region can already lay claim to the best-performing year- on-year metrics in the UK, whether that’s RevPar (revenue per availableroom) or occupancy rates.

The main reason for this is increased inward investment in the region’s key cities: Leeds, Liverpool and Manchester. The trend across the high street has gone from retail to leisure, with bars, pubs and restaurants attracting ever more visitors.

During the weekend, hotels have ridden the back of the wave, and their business models have developed at the same time. Mid-week, hotels see plenty of corporate trade, which ‘pays the bills’. In central Manchester, for example, 50% of rooms are booked at corporate rates.

Naturally, the sector has asked what to make of weekend trade, and started several years ago to create bespoke packages for weekend visitors, including spa breaks. This strategy has been vindicated with occupancy rates as high as 85% in Manchester, and year-on-year growth touching 8%.

The North of England

With growing demand for higher quality, hotels in northern England have been renovating their stock and offering bespoke packages, transforming themselves into destinations.

The Midlands

While some smaller operators continue to be vulnerable to risks, the Midlands’ hotel sector should see benefits from economic recovery and infrastructure investment.

and Sutton Coldfield can experience a spillover effect from increased demand to stay in Birmingham, and runway improvements at Birmingham Airport will only help hotels in these regions. RevPAR for regional airport hotels across the country as a whole (excluding Heathrow and Gatwick) showed an increase of 9.8% over the 12 months to May 2015.

Capital concerns

However, the significant risks associated with muted capital expenditure have not fully gone away. While the big hotel chains have chosen to invest, few of the older, unbranded, family-run hotels have the cash needed to invest in properties. Despite the appetite for investors to fund projects in the region, many are reluctant to provide capital to smaller hotel operators.

The risks they face are also connected to technology. In the coming years, larger operators will capitalise on the proliferation of mobile technology, meaning visitors will be able to book, check in, check out and unlock rooms with their smartphones. Smaller operators may see reduced demand if they’re not able to offer such convenient services.

The other worry affecting the whole industry is the growing dominance that online travel agents (OTAs) exert over hotels. OTAs are so powerful that they can command up to 20% of the price of a room as a booking fee. Hotels would do well to look at how to capture trade directly by improving their online marketing.

Matthew Hart, Relationship Director [email protected]

As confidence has returned to the economy, so the north of England has seen new hotel openings with a mix of branded hotels and independents.

Hotels in the region have also renovated their stock, having seized upon strong trade to finance these improvements. While some of this has gone towards maintaining quality of service, much of the spend has been devoted to diversifying products and services. Operators are now running bars, restaurants and fitness centres that are experiences in themselves, transforming hotels into destinations. It should come as little surprise that the sector is seeing demand for high-quality premium stock, and this year four five-star hotels have opened in Manchester.

The growing maturity of the market in the north is reflected by the government’s ambitions to create a northern powerhouse. The area hosts a broad spectrum of operators, from the high end to budget hoteliers with rent-by-the- hour offerings. These attract visitors with a variety of reasons for staying in the area, whether academic, sport-related or corporate.

RevPAR in Coventry shot up by 11.9% over the 12 months to May 2015, while in Nottingham it was up by 11.1%


Online travel agents

While there are many encouraging signs for the sector – notably strong demand and inward investment – there are also some concerns. The main one is the growing dominance that online travel agents (OTAs) exert over hotels. Over the past six years, their continuing popularity has come to mean that they’re now able to take 20% of the price of a booking as commission. And in the summer of 2015, Booking.com moved to introduce rate-parity agreements that would prevent hotels from offering cheaper deals on their own websites than those on Booking.com, prompting fears that other OTAs might follow suit.

The industry body, the British Hospitality Association (BHA), has voiced concern over such a restrictive move and it remains to be seen whether OTA practices will be further scrutinised by regulators. In the meantime, the pricing pressures form a push for brands to improve their online marketing, by focusing on search engine optimisation and their positions in the search results of sites such as Google and Bing.

John Howard, Relationship Director, [email protected]

John Platt, Senior Relationship Manager [email protected]

Trends for the hotel sector in the South West and Wales are somewhat fragmented, owing largely to the varied demands it has to service.

Outside Cardiff and Bristol, hotels tend to be smaller and family-run, and cater for seasonal trade. Traditionally, these have experienced problems getting access to finance, and throughout the downturn have been reluctant to devote their own funds towards improvement projects and capital expenditure.

Confident signs

The large hotel chains have continued to spend roughly 4% to 5% of turnover on refurbishment and upgrading, which has helped them maintain market share. Many have continued to see strong trading, with confident signs in occupancy rates and RevPar (revenue per available room).

Fortunately, demand for rooms in these cities is much less seasonal than it is in rural or coastal locations. People tend to make short breaks, and do so as much in October as they do in July. In Cardiff, hotels have seen demand evolve

The South West and WalesIn order to remain competitive, hotels in the South West and Wales must continue to invest in improvements and keep an eye out for new opportunities in the market.

beyond purely business conferencing, and the city boasts a range of stock that caters for all ends of the market. With developments such as St Davids II – a major shopping area – it’s become more of a leisure destination. The millions who visit as a result create strong demand for hotels suited to weekend shopping breaks, and offering relaxation facilities such as spas and swimming pools.

The city continues to see increased demand as a result of the sporting events held at the Millennium Stadium. In 2017, it will host the UEFA Champions League final, while the Millennium Centre, which has the biggest stage outside London, is a popular draw for West End shows and music gigs.

In April 2015, local councillors agreed to proposals for the BBC Wales headquarters to be built in Cardiff. This will prove a boon for the local economy and boost demand for rooms.

Fortunes for Bristol have been mixed. Its efforts to attract visitors to the city centre, with developments such as the Cabot Circus shopping centre, have been criticised for having failed to impress tourists. The overall effect on the hotel sector is that the mainstay of visitors come to the city for business conferences, rather than leisure.

Figures for the 12 months to May 2015 show that as many as 50.4% of the city’s hotel rooms were

booked on corporate tariffs. Many hotels have experienced disappointing occupancy rates and there are issues with oversupply of stock.

Competition for conferencing trade

Bristol faces competition for conferencing trade elsewhere, most notably from the Holiday Inn at the Winnersh Triangle just outside Reading. Around 10% of its revenue is due to conferencing and dinners, while the area is also popular among those attending Ascot or visiting LEGOLAND.

A focus on environmental impact and green credentials throughout the hospitality sector has meant that many of the big hotel brands have concentrated investment on build quality and sustainability. This not only reduces the environmental impact and costs faced by the businesses, but also helps create repeat custom through higher quality of service.

Elsewhere in the market, some areas have seen opportunities for niche and boutique hotels. Breweries St Austell and Brains have started to experiment with a number of small hotels attached to pubs. Their focus has been on quality food (and drink) combined with high-spec rooms.

Stuart Allison, Relationship Director [email protected]

Paul Williams, Head of Mid Corporates

Hotels in the north of England have renovated their stock, having seized upon strong trade to finance improvements. Much of the spend has gone on diversifying products and services 50.4%

The proportion of Bristol’s hotel rooms booked on corporate tariffs


Fortunes for the hotel sector in Scotland have been mixed so far in 2015. While some areas have seen continued growth and encouraging occupancy rates, others have been negatively affected by the global fall in oil prices.

In Edinburgh, the trend over the past year has been towards growing occupancy rates. These have improved steadily since 2012, with rates of 75% to 80% this year. These positive rates reflect more people visiting friends and relatives. Universities spur demand as well.

In Glasgow, there are encouraging signs too, although the main indicators are slightly down on last year. This is due mostly to the Commonwealth Games, which created a spike in occupancy rates and RevPar (revenue per available room) numbers in 2014. If you allow for the Games, this year the numbers reflect growth, which is mostly from corporate customers.

In Aberdeen, the picture is far less rosy than in other parts of Scotland. Hotels in the city had seen strong growth in recent years, but the

Scotland

While trade in Aberdeen has been affected by falling oil prices, Scotland’s hotel sector has been bolstered by demand from visitors to high-profile arts and sporting events.

decline of oil prices has meant that the sector is struggling to maintain its strong numbers. Occupancy levels have dropped by approximately 10% this year, and the sector has started to see a decline in RevPAR as well. Supply of stock is another concern, as 400 additional rooms are due to come on board this year, while 1,000 are being developed.

Since the mainstay of business has traditionally been corporate trade, it’ll take some time before hotels will be able to capitalise on tourist markets. These visitors should be a major focus in the future, and will benefit from the continuing improvements in stock.

One of the biggest trends affecting the sector is recruitment. Retention of staff – and chefs in particular – is an ongoing problem, and the July 2015 Budget announcement of the introduction of a national ‘living’ wage will also weigh on hotel managers’ minds.

Opportunities for savings

However, opportunities to save money across the supply chain have meant that many larger hotels have brought services such as laundry back in-house. Sizeable brands have both the resource and the scale to make this an effective strategy.

Over the past two to three years, most larger hotels have also focused on conducting energy audits. These improve a hotel’s energy-saving credentials and help to keep costs down. Much of the improvement work that resulted from these audits has been carried out, and hotels are starting to see the gains in their profit sheets.

Across the region, we predict the continued growth of occupancy, owing to the enduring

strength of the education and tourism sectors. In July, RevPAR in Edinburgh was up 9.6%, which tourism market specialist LJ Research attributed to events such as the city’s art and jazz festivals, and the Scottish Open golf championship held in nearby Gullane. Later this year, Glasgow will host the 2015 World Gymnastics Championships, which are expected to benefit Scotland’s economy by up to £5 million. These events will doubtless spur demand in the second half of 2015 and boost trade for all classes of hotel.

While there is plenty of development in the budget end of the market, there are some exciting events taking shape at the upper end as well. The gWest golf course at Gleneagles has been completed, and construction of the hotel – aimed at the ultra-high net worth market – is under way.

Andrew Moorhouse, Director, Commercial Banking [email protected]

80%Edinburgh has seen occupancy rates grow steadily to an upper limit of 80% this year

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Contact us

We’ve supported the leisure sector for over 40 years. Our team of dedicated Leisure relationship managers are focused on looking after businesses like yours. We’re based throughout the UK and will work closely with you to understand your business - helping you to reach your ambitions.

Visit us online: business.natwest.com/leisure-expertiseEmail: [email protected] us: 0800 529 8104Typetalk/Text Relay: 18001 0800 529 8104Monday to Friday, 9am-5.30pm (excl. public holidays). Calls may be recorded.

Andrew TaylorHead of Leisure, Retail & Franchise0792 080 [email protected]

Andy LancasterHead of Hotels0778 669 4940 [email protected]

Andy MoorhouseDirector, Commercial Banking0782 689 1056 [email protected]

John HowardSenior Relationship Manager0783 304 [email protected]

John PlattSenior Relationship Manager0783 330 [email protected]

Martin RamsayRelationship Director0774 776 2660 [email protected]

Matthew HartRelationship Director0776 602 [email protected]

Paul WilliamsHead of Mid Corporates, Thames Valley0782 454 1764 [email protected]

Stephen MacGregorRelationship Director0780 969 7815 [email protected]

Stuart AllisonRelationship Director0777 617 [email protected]

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