STRICT new curbs on the opening of budget hotels are set to be put in place in Edinburgh city centre after it emerged they were preventing luxury chains from investing in the city and thwarting other major developments.
New research has revealed that budget hotel chains like Premier Inn and Travelodge now make up more than half of the Capital’s hotel stock for the first time.
The city council has admitted Edinburgh’s hotel offering has become too heavily “weighted” in favour of budget operators during the downturn since the financial crash of 2008.
Now it is to launch a new drive to target big-spending visitors and expensive hotel chains amid warnings that Edinburgh is failing to meet key industry growth targets. This is despite the opening of 12 new hotels across the city in the last few years and an average occupancy rate of 83 per cent.
New controls on budget chains are expected to be drawn up after an official report warned that hotel developers were “typically able to outbid office developments for land and leases.”
Budget hotel operators, who also include Ibis and Holiday Inn Express, are said to be able to regularly outbid luxury hotel brands for sites.
Tourism and marketing chiefs in Edinburgh are expected to prioritise the targeting of some of the world’s biggest luxury brands for key development sites in future.
New planning regulations are set to be drawn up by the council to ensure an “appropriate mix of uses” in the city centre.
The council is expected to encourage major new hotel developments outwith the city centre, particularly on the waterfront and near Edinburgh Airport.
A key aim of the current tourism strategy for the city is to “extend its footprint” to ease pressure on the Old and New Towns during peak periods.
Budget chains have been responsible for the “vast majority” of new hotels which have opened across the city since 2012. The last luxury hotel to open was Missoni on George IV Bridge in 2009, although the chain pulled out of the city after five years and it has been operated as the G&V Royal Mile since then.
Two separate five-star hotel developments on the Royal Mile and at Haymarket had to be scaled back in the face of opposition and had sites snapped up by budget operators.
A new audit of the hotel sector shows that 707 hotel rooms were built across the city last year, with work under way on a further 661 rooms.
By the end of last year, planning permission had been approved for more than 3000 new hotel rooms, while a further 15 developments planned across the city are awaiting approval and could deliver another 2100.
Of the 4653 budget hotel rooms in the city, Premier Inn and Travelodge operate 2693 – way more than half. Just two five-star developments are planned at present – at the St James development in the city’s east end and on Victoria Street.
Other hotels are under construction or being planned on Market Street, on St Andrew Square, at the Gyle, on King’s Stables Road and in Leith Docks.
In a report for the council, director of place Paul Lawrence states: “Demand for more hotel provision within the city continues at a time when business growth, entrepreneurship and new-starts is also applying pressure on availability of office and workspace.
“Hotel developments are to some extent limiting the city’s supply of older office stock, which provide a source of lower-cost accommodation for early-stage companies. Hotel developers are also typically able to outbid office developments for land and leases, since hotel leases carry less risk and offer better returns on investment.
“Edinburgh’s hotel offering is weighted towards budget hotel chains. The city’s two largest providers of hotel bedrooms, Premier Inn and Travelodge, together account for over a quarter of hotel bedrooms in Edinburgh.
“Lower construction costs and higher occupancy of budget hotels mean they can often out-bid more expensive brands for buildings and land. While this means Edinburgh is a relatively affordable destination by European standards, it reduces the ability of the city to attract high-spending visitors.
“This runs contrary to the strategic priority of attracting less volume and more high-spend visitors.”
Gavin Barrie, the council’s tourism leader, said: “Edinburgh’s economy performed well against other areas during the economic downturn but there was some slowing of investment in luxury hotels in the city. It is really encouraging to see that changing as demonstrated by last week’s Virgin hotels announcement to bring their first five-star hotel outside America to Edinburgh.
“This clearly shows the current strength of the tourism market in Edinburgh and the potential for a greater mix of hotel development and investment in the future. The city is attracting considerable hotel investment and we are keen to encourage a range of hotel types to meet all needs.”
Visitor numbers to Edinburgh have soared from 3.27 million to 4.1m in the space of the last five years, while visitor spending is up from £1 billion to £1.4bn over the same period. But the Edinburgh Tourism Action Group (ETAG), the main independent industry body in the city, wants to see tourism revenue reach £1.6bn and the city attracting 4.8m visitors a year by 2020.
However the city is believed to be way below a target of increasing the average spend of visitors to Edinburgh by ten per cent. It is hoped that the development of several new luxury hotels across the city will help efforts to tap into new markets in the likes of China and India, as well as boost the business tourism sector in the city, which is said to be in need of a new venue and a greater range of luxury accommodation.
The new ETAG strategy states: “The quality of visitor experience in Edinburgh is key to driving future growth.
“With an ever growing and competitive global market, it is essential that the sector is outward looking and continually benchmarking the quality of its visitor experience relative to competitor destinations.”
ETAG chair Robin Worsnop said: “You would always want to attract higher-end hotels to Edinburgh so that you would get greater value out of the visitors who come here. For the same number of visitors you could get more spending because their guests would be wealthier. The council can only give planning permission for a site to become a hotel or not, but the city can also go out and try to attract high-end hotel brands to the city.
“Five-star hotel operators would like another five-star hotel to be on the market as it would create a bigger cluster for that high-end customer base and all Edinburgh to pitch for more business.
“But the market is the market. Where there is demand for things and people are wanting to demand we should be pleased about that. It can cost a lot of money to create a hotel development in Edinburgh, with its heritage restrictions.”
John Donnelly, chief executive of Marketing Edinburgh, said: “Edinburgh is a premium global city and has to target all groups to maintain that positioning. It is very encouraging that the city’s international profile and reputation has led to the announcement of plans for a new Virgin hotel.
“Their endorsement offers great value in promoting the city’s offering while signalling renewed enthusiasm for investment from luxury hotels.
“With a range of hotels currently being planned or in development we can be sure that we continue to have something to offer everyone, to support the ongoing success of tourism in Edinburgh.”