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Scotland attracts more Middle Eastern investors into $18 billion tourism industry

MSCI report shows capital value growth of 9.1% Y-O-Y in Scottish hospitality sector

Middle East – New research shows that Scotland continues to perform impressively well within European league tables for hotel occupancy levels. The total returns for investors in Scottish leased hotels have grown 9.5% year on year over the last five years.

The research, undertaken by Scottish Development International in association with MSCI, found that total returns from hotels ranked Scotland as the second best market out of 13 competitive European countries with regards to total investment returns in the leased hotel sector.

Scottish hotels produced a total return of 15.2% year-on-year for investors in 2014. This reflects a further strengthening of performance from 2013, when a return of 9.2% year-on-year was recorded.

This annual research is conducted to look at the property investor return performance of leased Scottish hotels. It aims to provide insight and empirical evidence for real estate investors to consider hotels in Scotland as a mainstream investment within their portfolio.

The study also found that:
•The impressive Scottish performance followed an improving European trend for the hotel sector in 2014. The rest of U.K. hotels were the top performing in Europe with a return of 17.2% year-on-year, up from 11.3% in 2013. Overall, Pan-European hotels returned 8.9% year-on-year (in local currency) last year, up from 6.5% year-on-year.

•Capital value growth of 9.1% year-on-year helped drive higher returns for Scottish hotels in 2014, when combined with an income return of 5.6% year-on-year. Capital values in Scotland have now grown by a cumulative 13% since the market crash in 2008.

•Arab businesses have already started to invest into Scotland’s increasingly attractive market. MBI International which owns the Scotsman Hotel in the very heart of Edinburgh City Centre.

Tom Marchbanks, Regional Manager Middle East, Scottish Development International, said: “Scotland has established itself as a primary destination for high end tourists from the Arab world because of what it has to offer in terms of its authenticity, excellent hospitality and diverse experiences. With Emirates Airline two daily non-stop flights from Dubai to Glasgow, Scotland has become more accessible for those travelling from the Middle East through. Some of the world’s best global hospitality brands are based in this region and we are seeing more of them looking at the investment opportunities that Scotland has to offer.”

Graeme White, head of tourism at Scottish Development International, said: “Scotland’s reputation as a world class tourism destination has gone from strength to strength. Spending by tourists in Scotland generates around £12 billion of economic activity in the wider Scottish supply chain and contributes five percent of Scottish GDP. The outlook for the sector is set to improve further with Scotland’s cities now seen by major brands as key locations to establish new business with many operators viewing Scottish hotels as ideal platforms for diversification.”

Colm Lauder, Senior Associate, MSCI, said: “Scottish hotels performed particularly well with a return of 15.2% in 2014. This represents the strongest year on record in the MSCI analysis, which began in 2006 at the previous market peak. The 5-year average annual return for Scottish hotels stood at 9.5% at the end of 2014, highlighting how healthy these assets have been for investors and marking out Scottish hotels as one of the top performing investment markets in Europe.”

Please note that this research only examines the return on investment performance of leased hotels as a property asset, and does not examine any other performance indicators, for example hotel operating performance, tourism or destination performance.