Scotland's hotel sector has bucked wider trends across the UK and London as it showed signs of further recovery in April despite continuing pressure on costs, a new report has found.

Hotel occupancy increased to 73.4% last month from 72.3% in March while revenue per available room (RevPAR) increased to £89.51 from £75.76, according to the latest RSM Hotels Tracker. RevPAR in Scotland April was higher in April than in the corresponding months in 2023 and 2019, when it was measured at £85.94 and £69.48 respectively. And it increased in Scotland as RevPAR figures remained static in UK and London hotels compared with the previous year, at £103.90 and £159.72.

The report may been seen as further evidence of the recovery of the Scottish tourism industry, which last year welcomed more visitors from overseas than it did before the pandemic in 2019, according to figures from the Office for National Statistics.

Scottish hotels reported a rise in occupancy and RevPAR against a backdrop of cost pressure in the industry, including a rise in the national minimum wage (NMW) in April. The increase in NMW was cited as labour costs per available room in Scotland increased to £14.80 in April from £13.38 in March and gross operating profit remained flat at 27% last month.

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Stuart McCallum, partner and head of consumer markets in Scotland at RSM UK, said: “Despite ongoing cost pressures recently accelerated by the national minimum wage (NMW) increase, Scottish hoteliers appear to be performing relatively well, with average daily rates and RevPAR increasing in April vs the previous month, year, and pre-pandemic levels. More encouragingly, this bucks the wider trend in the UK and London, which saw many hotels achieve flat levels of growth over the same period.

“However, businesses will be mindful of various cost pressures as they look to maintain healthy levels of occupancy ahead of a busy summer, and we’re also yet to see the full impact of the national minimum wage increases. While hotels have been able to charge higher room rates compared to pre-pandemic levels, little of this has been making its way through to the bottom line, with profit margins being squeezed. In addition, the changing political landscape will be adding uncertainty in the market.

“For some hoteliers, the fierce competition for hotel staff over the last couple of years has meant they are already paying above minimum wage. However, a rise in NMW has a knock-on impact as it ripples through the rest of the workforce as higher paid staff demand similar percentage increases.

“But, as we enter the summer months, the arrival of warmer weather and various international events including The Open at Royal Troon, Edinburgh Fringe Festival and Taylor Swift’s Eras tour will boost Scotland’s hotel sector. This will also be strengthened by the new flights direct to Scotland from the US and China, enhancing international connectivity and opening up new tourism opportunities.”

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The RSM report comes hard on the heels of a report by Cushman & Wakefield on Monday, which found that the hotel sector in Edinburgh turned in a “healthy performance” in the first quarter as the supply of hotels continued to rise.

The Hospitality Market Spotlight for Edinburgh, which surveyed full-service city branded hotels, showed that revenue was up 22% compared with the same period in 2023, ahead of the UK average, while gross operating profit per available room was up nearly 69%.

The RSM report found that hoteliers in Scotland had seen the average daily rate (ADR) of occupied rooms climb to £121.93 in April from £104.77 in March, and from £114.19 in April 2023. In comparison, ADR of occupied rooms in the UK were flat year-on-year at £139.51 in April, signalling that Scotland is bucking the wider UK trend.

Thomas Pugh, economist at RSM UK, said: “April was a tough month for consumer businesses with miserable weather keeping them out of shops and putting them off house viewings. It seems a similar picture for the hotel sector as well.

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“However, there are good reasons to expect spending on hospitality services to grow from here. First, households’ real disposable incomes are set to rise rapidly from April as inflation drops back to near 2% and tax cuts kick in, which will boost overall consumer spending. What’s more, consumer confidence should continue to rise ensuring that households spend most of their new income.

“Admittedly, spending on hospitality services has been relatively strong recently when compared to spending on goods. There may be some catch up spending on retail goods over the next year, especially as goods prices look set to fall. However, the increase in consumer incomes means that even if consumers restock on retail goods, they should also increase spending on hotels and accommodation.

“What’s more, a strong dollar and rapid growth in consumer incomes will make the UK a more attractive destination for visitors from America. Similarly, as the European economies rebound, demand for travel from the continent will increase.”