An extraordinary year
Glasgow had a great year in 2014 in terms of events. From the Commonwealth Games to the Ryder Cup, the MTV Europe Music Awards and the rising popularity of the SSE Hydro, it is safe to say that Glasgow's hotel sector had one of its busiest years on record.
One might assume, therefore, that we would see annual increases in all areas. The Commonwealth Games certainly gave July 2014 figures a spike, with a 4.2% occupancy rate rise compared with 2013, and a stunning goppar (gross operating profit per available room) change of 133.7% according to figures from HotStats (see graphs). Other months may have unexpectedly suffered, but August's 1.4% drop in occupancy could be explained by a busy Edinburgh festival in the same month.
Q1 and Q3 2014 saw significant increases in goppar, inspired by burgeoning festivals such as Celtic Connections and sporting events such as the Ryder Cup, while Q2 saw a decrease, in part due to an overestimation by the sector of its demands during this interim period.
Curiously, April and June saw a rise in occupancy and average room rate (ARR) and yet suffered a decrease in goppar, suggesting a more efficient pricing structure might be something to consider if the sector does not want a repeat of such figures in 2015.
It is unlikely that Glasgow's hotels will see a year like 2014 again. Year-on-year rises of 19.2% ARR and 34.6% goppar are exceptional, but hopefully the sector will be able to benefit from the capable manner in which the city handled these events, building on Glasgow's reputation as a must-visit destination.
Gareth Jones, partner, Mazars
New investment comes to the city
During the peak of the Commonwealth Games, occupancy levels reached 97% with hardly a room to spare across the city. The average occupancy rate for the year was 87.3%.
So what's in store for 2015 and beyond? More of the same. The SSE Hydro has recently been named the second busiest entertainment venue in the world behind the O2 in London and ahead of Madison Square Garden in New York. It has surpassed all expectations since its opening just 16 months ago. With more than 90 performances already confirmed for 2015, including One Direction, Taylor Swift, Elton John and Take That, the venue will continue to generate demand for city hotel rooms.
While the leisure and short-break markets are key to pulling in 2.3 million visitors a year, one in five bedrooms sold in Glasgow is to a conference delegate. The Glasgow City Marketing Bureau, named the UK's best for the eighth consecutive year, continues to drive business into the city's hotels. In 2013/14, conference business was valued at £13b with 560 conferences attracting more than 485,000 delegates. Working together, the
Marketing Bureau, the Scottish Exhibition and Conference Centre and city partners can confirm 472 conventions through to 2024.
With the referendum now behind us, there has been an increase in the level of investor and developer interest, with several large acquisitions, previously on ice in the run-up to 18 September, now signed and sealed. Investor confidence, it would appear, has returned, and the hotel sector is leading the charge.
Supply of hotel rooms continues to grow: the De Vere Urban Resort hotel (120 rooms) is well under way at Pacific Quay; as is Travelodge (171 rooms) on Queen Street, Ibis Styles (101 rooms) on Miller Street, and Hampton by Hilton (88 rooms) on W Campbell Street. A new Z Hotel opened at the end of last year, adding 104 rooms, and the Premier Inn at Pacific Quay opened just before the Games with 180 rooms.
Motel One, set to be Scotland's largest hotel by room number (374), is in the pipeline and likely to be open some time in 2017.
In addition, a variety of mixed-use developments in and around the city centre come with planning permission for new hotels and with a steady flow of fresh enquiries from developer/operators, this bodes well.
As the structure of the new City of Glasgow College rises up into the skyline, the disposal of its existing estate has created a number of interesting investment opportunities, including the highly visible College of Building and Printing Tower - a landmark during the Games with its giant People Make Glasgow external branding. This Grade B-listed building commands spectacular views over the city and beyond, making it perfect for a prominent hotel.
•Invest Glasgow will be promoting these and more opportunities at property show MIPIM in France on 10-13 March. All these investment opportunities appear on the MIPIM website as well as Invest Glasgow's website (www.investglasgow.com).
Anne Murray, inward investment manager, InvestGlasgow, Development & Regeneration Services, Glasgow City Council
UK hotel transactions in the past year have been focused on portfolios, with well-known Glasgow hotels, such as the Crowne Plaza, part of the QMH portfolio, the Menzies hotel and Village Urban Resort (a development still under construction at Pacific Quay) all transacting as part of larger group deals.
Further afield, Cameron House at Loch Lomond and Westerwood hotel and golf resort in Cumbernauld were also part of portfolios that changed hands, although the latter was part of a debt disposal rather than a traditional asset disposal.
Other transactions, such as Starwood Capital's acquisition of the Blythswood Square hotel, along with Apex Hotels' purchase of the Marks hotel, show both investor and owner occupier confidence in the future of the Glasgow hotel market and indicate the appetite for good-quality independent
assets from a variety of buyer types.
The Glasgow market has 7,457 graded rooms and the majority of these are budget and four-star. This increases to more than 8,000 rooms when serviced apartments and hostels are included. The most recent new additions have been in the budget/limited-service category, which includes the Premier Inn Pacific Quay and the opening of a Z hotel. Supply is dominated by branded hotels, with almost 80% of existing stock a branded product.
There are four hotels in the city centre due to open in 2015. Three of these are brands new to the city, including Hampton by Hilton - operated by Kew Green - Village Urban Resorts and Ibis Styles, which will be operated by Redefine BDL. Spanish hotel company MeliÁ¡ is also rumoured to have agreed to open in the city. Many brands are still seeking opportunities in the Glasgow market, with some actively chasing available sites
surrounding the city centre.
Established demand generators, such as the SSE Hydro, continue to boost leisure trade, while Glasgow's growing reputation as a conference destination is expected to be a driver in the resurgence of the MICE (meetings, incentives, conferences and exhibitions) market. In addition, the dynamic and successful city marketing bureau is expected to continue to attract demand generators, which can only benefit the hotel market and
attract further investment.
Kerr Young, director, JLL Hotels & Hospitality Group