Edinburgh saw the highest level of investment in hotels of any city outside of London last year.
Analysis from estate agency and property consultancy Knight Frank showed that the city saw 11 deals worth around £260m during 2021.
Scotland’s cities were the most active regional and devolved nations markets for hotel transactions, excluding London and the South East, with £335m worth of transactions - a 28% increase on the £260m registered during 2019.
Edinburgh accounted for 78% of 2021’s figure and a 15% share of the total volume of hotel deals outside of London.
Glasgow saw 21% of hotel investment in Scotland’s prime cities - approximately £70m - and 4% of the total figure for the regions and devolved nations.
Three deals in Edinburgh accounted for nearly half of the city’s total investment volumes : the long leasehold of the 240-bedroom Courtyard by Marriott Edinburgh, acquired by Marathon Asset Management; Pandox’s acquisition of the 146-apartment Adagio Aparthotel Edinburgh; and Zetland Capital Partners’ purchase of the 157-bedroom Macdonald Holyrood Edinburgh.
Hotel deals in Scotland also achieved the highest average price per room of any market outside of London, at £170,000.
Edinburgh also achieved a premium of almost 50% compared to the regional UK average transaction price per room of £114,000.
Knight Frank’s research draws on location analysis of more than 170 hotels transacting outside of London during 2021, excluding hotel developments and ground-lease transactions.
Alasdair Steele, head of Scotland commercial at Knight Frank, said: “Despite the obvious challenges of the pandemic - and notwithstanding the current situation in Ukraine - the level of investment in hotels in Scotland points towards growing investor optimism for the hotel sector and confidence in its long-term prospects."
Philippa Goldstein, head of hotel research at Knight Frank, explained: “The appetite for hotel investment witnessed during the final quarter of 2021 is testament to the level of interest and capital available from well-funded investors eager to establish a presence in a sector that has proven its resilience.
“The pandemic forced owners and operators to properly understand the cost structure and manage a hotel’s cash flow effectively,” she continued, adding: “With the current inflationary environment, this will further encourage operators to think creatively about increasing efficiency to help maintain or improve margins.”
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