Hotel market responds to traveller demands

Iconic hotel names are disappearing from Edinburgh’s city centre, making way for more globally recognised brands.

Possibly the most notable change occurred in 2011 when the Caledonian Hotel was renamed officially as the Waldorf Astoria Edinburgh.

More recent examples of traditional hotel names in the capital to be dropped include the George Hotel, which was rebranded as The Principal Edinburgh last November.

The new brand name is owned by US investment firm Starwood Capital – and has already also been applied at hotels in Manchester, York and London, with Edinburgh’s Roxburghe and Bonham hotels, plus Glasgow’s Blythswood Square and Grand Central Station, among other hotels due to be rebadged under the Principal name in 2017/18.

By autumn last year, Starwood Capital had already invested £150m into its Principal portfolio, underlining the financial backing which many of these global operators can contribute to the sector.

The historic Royal British Hotel on Princes Street was also renamed in late 2016, when it was converted to InterContinental Hotels Group’s Hotel Indigo brand.

Various factors are driving this trend, not least changes in consumer preferences; branding is increasingly important in the hotel sector. Consumers have greater awareness of what the market has to offer and are more likely to make bookings based on their experience of known brands.

While location remains a key factor in the decision process, consumers are increasingly focused on market tier. This is where bigger hotel operators have a clear advantage.

Starting at budget level, brands which provide a clear and reliable offering to guests on what they get for their money, right up to the luxury market where the clientele demands a guaranteed level of comfort and service for their premium spend.

Consumers become acquainted and comfortable with established hotel brands, so a name which may be iconic within its local marketplace may have little recognition value to guests who live in another part of the country or the globe.

A wealthy tourist coming to Edinburgh from China may not have heard of the Balmoral, for example, but they may well be familiar with W Hotels, a design-led lifestyle luxury brand which is due to open its doors in the new Edinburgh St James development in 2021.

Hotel operators continue to be attracted to Scotland due to its unique tourism offering and the weaker sterling exchange rate is boosting visitor numbers from overseas.

What then does this all mean for the future of the hotel sector in Edinburgh?

I believe there will still be a place for high-end properties which primarily trade off their traditional names, such as the Balmoral, Scotsman and Glasshouse hotels.

Other hotel names, such as the Prestonfield and the Howard in Edinburgh’s New Town, are also likely to have a future as there are consumers who like a bespoke, boutique experience.

These establishments benefit from not having to pay brand licence fees; however they do face a challenge, in today’s world, of building and maintaining consumer awareness without the resources available to multinational hotel operators.

I suspect that overall we will see the demise of more of Edinburgh’s historic hotel names as the big operators continue to expand their brands.

The capital’s hotels market continues to perform strongly, with LJ Research reporting that December 2016 was the 13th consecutive month of average room rate growth in Edinburgh.

With the big hotel brands keen for a big slice of the action, change seems inevitable.

This article first appeared in The Scotsman.

Look out for CMS’ hotel & leisure team at this week’s International Hotel Investment Forum (IHIF) in Berlin.