The performance of Aberdeen's hotel market has historically tracked the price of Brent Crude oil, due to the city’s reliance on business travellers working within the oil and gas industry. The oil price shock in autumn 2014 was therefore reflected in a fall in both average room and occupancy rates – resulting in RevPAR (revenue per available hotel room) hitting the bottom in Q1 2016.

Year-on-year decline has since softened. The recovery of oil prices has been tracked by Aberdeen's RevPAR performance, albeit with a slight lag associated with historical trends (see graph below). Q1 2018 has already highlighted this, with RevPAR declines softening to 2.3 per cent year-on-year, a significant improvement from the 11.1 per cent decline during the same period in 2017. This is in line with the climbing price of Brent Crude oil, which traded consistently above $65 per barrel in Q1 2018 – a 24.5 per cent increase compared with the Q1 2017 average.

Based on this recent recovery and positive outlook for further oil price growth, we estimate that Aberdeen’s RevPAR will grow in the second half of 2018. This will be strengthened further through a number of large-scale infrastructure schemes .

Aberdeen has turned its attention to sustainable investment in renewable energy through the development of the £335 million Aberdeen Offshore Wind Farm, with the first of 11 turbines having been installed in April 2018. Efforts are also firmly in place to increase Aberdeen's conference and leisure offering. The golfing industry provides a great deal of leisure investment into the region, with over 50 golf courses located nearby, and Aberdeen’s conference offering is set to strengthen considerably with the new 12,500 capacity Aberdeen Exhibition and Conference Centre, due to open in 2019.

Complementing this is the £20 million expansion of Aberdeen International Airport, increasing terminal capacity by 50 per cent upon completion in 2019, while road accessibility to the city will be further improved in 2018, with the completion of Scotland's largest construction project, the £750 million Aberdeen Western Peripheral Route.

Finally, access by water will also be enhanced through the £350 million expansion of Aberdeen Harbour, which will accommodate larger commercial vessels and cruise liners once complete in 2020.

The fall in the price of oil has changed the landscape of Aberdeen, but with challenges have come new opportunities and the city, and its hotels industry, are bolstering these and moving forward.  

Further information

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