Old Town hostel bought in £15m deal

The Smart City Hostel' on Blackfrairs Stree. Picture: Julie Bull
The Smart City Hostel' on Blackfrairs Stree. Picture: Julie Bull
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A HOSTEL located just off the Royal Mile is set to be bought over for almost £15 million.

Smart City Hostels in Blackfriars Street, which includes a bar, lounge and en-suite student bedrooms leased to Edinburgh University, is in the process of being snapped up by “boutique hostel” chain Safestay.

If completed, the sale will see the business quietly change hands in the next couple of months before undergoing improvement works and re-branding by the end of the year.

Safestay bosses said upgrades would include new bunk beds with “hotel-quality” mattresses and a host of electronic fittings and interior changes – as well as better wi-fi.

And they insisted no staff would be laid off as a result of the takeover, with extra training given to those who need it.

The hostel boasts 272 beds available throughout the year, as well as 81 en-suite student rooms that are leased to Edinburgh University during term-time – a deal generating £312,000 a year in rent.

When the student rooms become available over the summer months, the hostel’s maximum capacity is boosted to 615 beds in time for the festival crowds. The lease to Edinburgh University has 12 years left to run.

The property, which spans eight floors in total, also has a bar and lounge with an outside courtyard and split level terrace.

Philip Houghton, chief executive of Safestay, said the combination of student accommodation, hostel and bar offered a “really good business model” that would allow the chain to “maximise revenue”.

And he promised the company would roll out a “bespoke design” that would complement the building’s unique central location.

He said: “It’s a very nice blend of businesses and it’s a good business fit for Safestay. Edinburgh is just an amazing city, it’s experienced strong growth over the last couple of years.

“We’re excited to be entering into the Edinburgh market. The location of the hostel in Edinburgh is fantastic – you couldn’t have a stronger location.”

It is understood Smart City Hostels Edinburgh enjoyed revenues of £2.7m last year – raking in profits of around £1m.

Safestay’s takeover of the site will mark the chain’s fourth hostel, with two already up and running in London and York and another set to open soon in London’s Holland Park. The company, which hopes to snap up 20 sites across the UK in the coming years, is now looking to expand overseas to European “gateway cities”.

Larry Lipman, chairman of Safestay, said: “Edinburgh is a top ten city for European travellers and one we have been targeting to gain a presence in since Safestay was launched.

“We know the hostel well and it has an established presence on the hostel circuit and will therefore be another flagship site within our growing portfolio as we pursue our aim of developing a European network of Safestay hostels.”