Crieff Hydro has announced plans to expand the number of hotels in its portfolio from two to eight, including the acquisition of two sites from McMillan Hotels.
The hotels, which are in the Scottish countryside, are expected to benefit from a rise in tourism in the country as it prepares to host both the Commonwealth Games and the Ryder Cup.
The expansion has been undertaken through two deals. The first is the acquisition of the Peebles Hydro and the Park Hotel in Peebles, for an undisclosed fee, from McMillan Hotels. The hotels give the company a presence in the Borders area.
McMillan Hotels managing director, Douglas McMillan said: “We have been in discussions with Crieff Hydro for more than a year. We are in the process of restructuring our own business, refocusing and reinvesting in our properties in our heartland in the south west of Scotland.”
In a separate deal, the business has undertaken a joint venture with the owner of a further four hotels to manage three sites on Scotland’s West Coast and one in Harrogate.
The deals will add over 400-rooms and, Crieff Hydro said, GBP10m of revenue.
Crieff Hydro CEO Stephen Leckie said: “Taking on a mixed bag of country hotels is hardly fashionable. But once you’re away from the cities, it’s hotels like this that are the real heart and soul of Scotland’s tourism product and tourism is increasingly recognised as being amongst the biggest economic drivers for the country.”
Leckie, who is also chair of The Scottish Tourism Alliance, added: “Over the coming years, our approach will be to develop and enhance the existing facilities in these hotels and build on their individuality and personality. They are all very different from Crieff Hydro as a destination resort.”
Leckie said that he expected the Ryder Cup to boost tourism in Scotland this year, although the timing of the tournament had not influenced the decision. The deals came as Perth and Kinross Council is due to consider Crieff Hydro’s GBP100m application to build a development with 200 holiday lodges, a 200-bed care home and assisted living centre and new leisure and retail facilities.
Last month saw BDO report that hotels in Scotland had outperformed the rest of the UK in October. Edinburgh had the highest occupancy in Scotland at 84.5%, while Aberdeen recorded the highest rooms yield of any part of the UK outside London, rising 11.9% to GBP75.97.
Alastair Rae, a partner in the property, leisure and hospitality sector at BDO, said: “The hospitality sector is one of the key barometers of how well the economy is performing and this sustained increase in performance over 2013 indicates that things are improving.
“It seems likely, given all the recent economic data, that this will continue into 2014 when, we hope, the sector will experience one of its best years for some time.”
Tourism Minister Fergus Ewing added: “The strong figures across Scotland show that our world-renowned tourism assets and events offer a fantastic marketing opportunity – serving to attract more visitors and encourage them to spend more and stay longer.
“In this Year of Homecoming as we prepare to host both the Commonwealth Games and the Ryder Cup, I am confident that 2014 will be a remarkable year for tourism – showcasing the best of Scotland and building a lasting legacy for the visitor economy that will bring benefits for many years to come.”
The comments were supported by The Bank of Scotland's Purchasing Managers' Index, which reported that January saw the “most marked increase” in manufacturing and service sectors for three months.
For Crieff, the enthusiasm for Scotland as a destination and the recovery of its economy meant an easier lending environment. Crieff Hydro managing director John Jennett said: “We’ve been working on these deals in a different transaction climate to the one we’ve been used to in the past. Whilst the approach is different, we have had a positive experience with most lenders and were delighted to get competitive offers from four major banks.” The group has worked with Santander both for the core business and to fund the acquisition and development of Peebles Hydro.
Despite this, the company has warned that, after years of under-investment, the hotels “may never return to the four-star standard they once were”. Jennett said: “Running hotels is about hospitality – in other words looking after people first and foremost. Whether those people are your customers, your team or other people you deal with. It has to be commercially sound, but if you come at it from a belief and a pride in hospitality then you are on the right track.”
HA Perspective [by Katherine Doggrell]: Scotland has made it through the downturn floating on a lake of oil, particularly in towns such as Aberdeen, but now, with the economy flourishing and the Commonwealth Games and Ryder Cup approaching, it is looking to attract leisure visitors to the countryside as well.
Scottish tourism can rely on a level of support from VisitScotland which is not seen elsewhere in the Union, with the Scottish parliament providing it with a budget double that of VisitBritain’s – which in 2012 was GBP44m against GBP20m.
The one potential blot for Scotland is the vote for independence. At this point, the general feeling is one of ‘it’ll never happen’, but at this point, the campaigning proper hasn’t begun yet and Alex Salmond is nothing if not a seasoned campaigner. He has already taken the step of lowering the voting age to 16, which is expected to play well for the independent vote and no doubt he has other tricks up his sleeve.
One investor into the Scottish hotel market who this correspondent spoke to was inclined to describe the vote as “a tough call”, with the situation not aided by David Cameron’s reluctance to get his boots on the ground and speak directly to the Scottish. While Salmond is unlikely to have the support of the country’s industry, which enjoys the benefits of the wider union, he could yet have popular support.
The possibility of an independent Scotland should not deter Crieff in the short term – the country’s tourism is clearly capable of taking care of itself – but an uncertain future may deter those who would invest in it.