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Premier Inn set to signal better times for Scotland’s hotel industry

by John Phelps
© The Herald
Originally published: 13.12.2009
Scotland’s beleaguered hotel industry could receive a little seasonal cheer this week when the giant Premier Inn is due to confirm a sharp improvement in recent trading.

The UK’s biggest chain, with some 40,000 rooms, is unlikely to call the bottom of the market just yet, but tomorrow’s release of third-quarter figures will indicate that the industry is finally on an improving trend after one of its worst years on record.

Analysts at Morgan Stanley, for example, believe that the decline in its average prices may have slowed to an average rate of around 7% annually in autumn, from 9.4% in the earlier months of the year. This has continued to improve, raising hopes that the trend could turn positive earlier than expected in 2010.

Private operators hope that this could signal an easing in the ferocious price war, which has seen Lenny Henry advertising Premier Inns rooms for £29 a night while the rival Travelodge has its own offer at just £9 for early bookers.

There have been complaints that these eye-catching offers are hard to come by but a quick trawl of the internet produces a string of deals available for February, including £9 rooms at Aberdeen Airport and Dunfermline and £19 charges at hotels in Kilmarnock, Stirling, Paisley and Braehead, among others.

The competition and a slump in the numbers of business travellers have resulted in one UK hotel closing its doors every other day throughout 2009.

Scotland’s own hotel industry, employing 200,000, has fared better than most because it relies more on tourism than on the much-tougher (but more profitable) business market.

Glasgow and Edinburgh were the only European cities to report an actual increase in occupancy rates earlier this year – but the “no room at the inn” signs came at a price. The Hotels.Com. Hotel Price Index showed that average room rates in Edinburgh slipped by 9% in the first half of this year while rates in Aberdeen (-25%) and Inverness (-20%) suffered much bigger falls.

Glasgow fared better with a 5% slippage but its average charges at £73 a night were well below those in most other cities. Despite the tough times, there have been a number of prestige openings in recent months, including the £25 million conversion of the old Scottish Automobile Club into the Blythswood Square Hotel in Glasgow.

And developers still plan to start work on the 26-storey Jumeirah Hotel, Scotland’s tallest building, on the corner of Argyle Street and Robertson Street early next summer.

These luxury hotels are expected to command their own niche markets and will not be directly affected by the activities of the budget chains who believe they can more double their long-term share of the hotel trade to as much as 25%.

The Dubai-owned Travelodge, which claims it is now the biggest operator in Edinburgh, has brushed aside concerns over its finances to announce that it is actively negotiating an additional 15,000 rooms to add to its present 26,000 rooms in more than 380 hotels.

In a meeting with Morgan Stanley, directors indicated short-term plans had been to open 1800 rooms this year, 2000 in 2010 and another 3000 in 2011.

Premier Inn, which is part of the Whitbread leisure group, should give more details of its own programme tomorrow but has already announced that its pipeline now runs to an additional 10,000 rooms. Much of the growth could come from purchases of existing businesses.

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