Scotland's luxury hotel boom: Average room rate hits record £381.76 in August

Scotland’s luxury hotels led the way this summer with record room rates being charged as major events attracted tourists from all over the world.

A new report shows that the hotel sector enjoyed a strong performance during the peak summer season, with top-end establishments driving the industry’s recovery post-pandemic. And with many cost-conscious consumers trading down to budget hotels, it’s the middle market that is being squeezed the most, according to the Hotels Tracker: Focus on Asset Classes research from audit, tax and consulting firm RSM UK.

Average daily room rates of luxury hotels in Scotland reached a record £381.76 in August, up from £349.85 in July. In the same period, rates of Scotland’s middle market hotels increased from £129.91 in July to £147.82 in August and were up from £118.35 to £140.38 for those classed as “budget” hotels. While luxury hotels have always been able to charge much higher room rates than the budget market, the gap has widened, RSM claimed, with Scotland’s luxury hotel prices being 172 per cent higher than budget hotels in August 2023, when compared to the pre-pandemic peak season at 156 per cent.

Similarly, with gross operating profits (GOP), Scotland’s luxury hotels are benefiting the most, with GOP (per available room) increasing from £227.20 in July to £243.33 in August. The GOP of the luxury market remains significantly higher than the middle market (£56.36 in July, rising to £76.13 in August) and budget hotels (£57.32 in July, rising to £78.14 in August). The report notes that GOP has increased across Scotland’s hotel market this August, when compared to the same period in 2019, pre-Covid, with the biggest jump in budget hotels (up 64 per cent), followed by the luxury market (up 38 per cent) and the middle market (up by just 14 per cent).

RSM UK’s Edinburgh office noted that average daily room rates of luxury hotels in Scotland reached a record £381.76 in August.

When looking at occupancy rates, the lower end of the market comes out on top. Occupancy of the nation’s budget hotels was an average 89 per cent in August (up from 87 per cent in July), compared to 86 per cent (up from 81 per cent) for the middle market and 83 per cent (down from 84 per cent) for the luxury market. While occupancy is lagging behind pre-pandemic levels in the luxury and middle market (91 per cent and 88 per cent respectively during August 2019), budget hotels bucked this trend with lower occupancy levels in 2019 (84 per cent).

Claire Monaghan, partner in RSM UK’s Edinburgh office, said: “Demand in Scotland’s hotel sector has remained strong throughout the summer months, bucking the slowdown trend seen more widely in the UK, due to more international tourists visiting throughout August for events such as Edinburgh Festival Fringe and the UCI Cycling Championships. But, looking more closely at the data, we can see that demand is being driven by growth in the luxury market, with average daily room rates, gross operating profits and occupancy rates all increasing in August.

“The gap between luxury and budget hotels continues to widen. That being said, Scotland’s budget hotels came out on top in August for occupancy rates. With both luxury and budget doing well, it’s the middle market that’s being squeezed.”

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