Scottish hotels outperform UK as occupancy and profits rise

In the UK as a whole, occupancy increased to 79.7% in May, up from 79.4% a year earlier.

The gross operating profit margin for the Scottish hotel sector was 43.7% in May, compared to 42.2% in the same month of 2025. The corresponding profit margin for the UK hotel sector increased only slightly over the same period, to 36.8% from 36.7% in May last year.

RSM said warm weather and public holidays boosted Scotland’s hospitality sector in May.

However, he observed that “continued cost pressures mark a difficult road ahead for hotels”.

Average daily rates (ADRs) for occupied rooms in Scotland increased from £156.44 to £172.09 in May, year-on-year. For the UK as a whole, the ADR increased from £150.82 to £156.72 over the same period.

Revenue per available room (RevPAR) increased from £129.49 to £144.02 in Scotland and from £119.74 to £124.84 across the UK.

Katie Morrison, partner and head of consumer markets at RSM in Scotland, said: “The combination of warm weather and bank holidays in May provided a welcome boost to hotels across the UK, with Scotland showing particular strength as a tourist destination. »

However, she stressed that “the real test will be to see whether the Scottish hospitality sector can maintain its growth trajectory throughout the summer months as economic pressures persist”.

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Ms Morrison observed: “Luxury hotels remain a key driver of Scotland’s success, amid a growing trend towards shorter but more upscale stays. However, as overall average daily rates for occupied rooms continue to rise, the region’s hoteliers face a careful balance between maximizing profit growth and remaining an attractive holiday destination. If the gap continues to narrow between Scottish hotel prices and more expensive UK regions such as London, it could diminish the appeal of Scotland as an option for domestic getaways, particularly if tourists can get an overseas trip for a similar overall price.

She added: “Even with the fall in the price of oil, there remains much uncertainty about how and when this will reduce the energy cost burden faced by the hospitality sector. Coupled with further cost increases due to changes to National Insurance and the minimum wage, Scottish hotels could face further pressure to increase room rates to absorb the extra costs, particularly during periods of high demand, such as the Edinburgh Fringe Festival. This increases the risk that hotel prices in the region reach a tipping point, where higher rates begin to rein in demand.”

Ms Morrison noted that “hotels looking to maintain a growth trajectory might consider investing in additional facilities or services to increase the value of the experience they provide.”

However, she added: “This may not be a viable option for hoteliers facing the pressure of tight profit margins and cash flow issues, if they are unable to access investment. »

Commenting on the UK-wide situation, RSM UK Chief Economist Thomas Pugh said: “Even with the recent fall in oil prices, the second half of the year continues to prove difficult for consumers, with real household disposable incomes expected to virtually stagnate this year as a weak labor market weighs on wage growth.

“The good news is that consumer confidence is holding up a little better than expected so far and that households are saving a large part of their income, which means that it is possible to offset the impact of weaker real income growth on spending by saving a little less. Indeed, the savings rate has already fallen from 9.6% to 8.9% in the first quarter, which allowed consumption to jump by 0.6% despite a fall in real household incomes. households.

“Either way, consumption growth is expected to average just 0.1% per quarter over the rest of the year, as a slowing labor market, rising inflation and lingering domestic political uncertainty weigh on activity. »