Edinburgh hotel boom collides with rural gloom, by Jeremy Grant

Last week, Edinburgh Airport notched up another milestone when Emirates operated the inaugural flight of the airline’s new Airbus A350 aircraft to the Scottish capital from Dubai.

Economy class passengers dined on Scottish smoked salmon, cheddar with Nairn's oatcakes and Walker’s shortbread, while business class was offered the more upscale delights of Lanark blue cheese soup, Angus beef fillet and cranachan cheesecake with raspberry coulis. 

 If airline menus offer an allegory for economic bifurcation, the hotels business provides another. 

 Last week Knight Frank, the property agents, revealed that investment in Scotland’s commercial property sector last year was up 30 per cent by deal value on the previous year. 

Hotels dominated, with investment more than doubling on 2023’s level to £488 million. Notably, Edinburgh accounted for more than half of hotel deals by value at £247m. That was more than was ploughed into hotels in the whole of Scotland in 2023.

The reason is clear: booming tourism, especially from abroad. Emirates’ Dubai-Edinburgh flight is one of 18 long-haul routes handled at Edinburgh Airport, which had only two such routes as recently as 2012. 

Almost one third of the 16m visitors to Scotland in 2023 came to Edinburgh, according to Visit Scotland. Of that third, the proportion from abroad was 29 per cent higher than in 2022. Domestic tourist arrivals fell by two per cent. 

Small wonder that foreign investors are following the money and snapping up hotels. Dubai-based Dutco Group last month bought Bruntsfield Hotel in Edinburgh, its second acquisition since buying the five-star Mar Hall hotel and golf resort near Glasgow a year earlier. Recent restrictions on Airbnb lets have further boosted the sector, which may well shrug off the imposition in 2026 of a five per cent visitor levy, confirmed last week. 

Yet the flip side was on display last week too. In the latest edition of the popular Holyrood Sources podcast, First Minister John Swinney and his deputy, Kate Forbes, were quizzed about the impact of business rates and associated relief on hotels and hospitality businesses located away from big cities – in places like Dumfries and Galloway. 

Geoff Aberdein, one of the podcast hosts and a former chief of staff to the late Alex Salmond, wanted to know if the Scottish government was prepared to revisit, post-budget, how business rates are assessed after highlighting the plight of Duncan McConchie, a farmer and hotelier near Gatehouse of Fleet. He had just taken to social media to explain that business rates and other factors had forced the imminent closure to the public of Gather, his restaurant, and its conversion to a wedding venue. 

Forbes pointed out that England assesses business rates relief in a way that results in bigger businesses effectively funding tax breaks for their smaller counterparts – unlike in Scotland. “We have said we are open to changing the methodology. The key is getting something that everyone can get behind,” she said. 

Whether anything comes of this will be too late for businesses like McConchie’s, which must also deal with increased employer national insurance, seasonality and rurality. “Lurking in the background is also the lack of housing. Our youngsters are leaving in droves,” McConchie tells me. “It’s a perfect storm.”