Aberdeen - A hotel supercity

ABERDEEN

A HOTEL SUPERCITY Opportunities for Operators and Investors April 2015

FOREWORD Aberdeen is an economic powerhouse. The city drives the Scottish economy and is second only to Inner London in terms of productivity – measured by GVA. Oil & gas, financial and business services, food and drink, life sciences and tourism have led significant regional growth since the early 2000s.

Aberdeen is known for oil & gas and it is a global energy city. As an energy city, Aberdeen sits alongside Calgary, Abu Dhabi and Stavanger and competes not with other UK cities but other energy cities including Houston, Perth and Kuala Lumpur.

The city has built up 50 years of expertise in oil & gas and subsea engineering. Consequently, skills developed and services based in Aberdeen are in demand all over the world and the city attracts industry visitors from around the globe. Despite fluctuations in the global oil price over the last 10 years, records illustrate strong long term growth of oil & gas sales both domestically and internationally.

The region also boasts world renowned golf courses, mountains, castles and miles of beaches. The region is a haven for tourists and the city attracts high volumes of business visitors all year round.

In 2014, Aberdeen was again listed as a ‘Hotel Super City’ alongside locations such as Singapore, Barcelona, Beijing and Central London.

Aberdeen occupancy rates for the year 2014 were 77%, rising to almost 100% Monday to Thursday driven by a high demand from business travellers.

Lower weekend occupancy rates present huge growth opportunities in the leisure market for hoteliers and the city generally. A major part of the regional economic strategy is to grow both business and leisure tourism visitor levels.

The hotel development pipeline is strong but many opportunities still exist as long-term growth is assured. The city will see major investment as a new city centre masterplan is delivered and regional employment is forecast to grow by up to 39,000 by 2025.

This is an exciting time in Aberdeen and the regional surrounding area, it is a great time to consider investing in the region which has proven to provide strong long-term financial returns for investors.

OCCUPANCY RATES IN 2014 WERE AT 77% RISING TO ALMOST 100% MONDAY TO THURSDAY

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RECORDS ILLUSTRATE STRONG LONG TERM GROWTH OF OIL & GAS SALES BOTH DOMESTICALLY AND INTERNATIONALLY.

REGIONAL EMPLOYMENT IS FORECAST TO GROW

BY UP TO 39,000 BY 2025

Image: Aberdeen City Council

IN 2014, ABERDEEN WAS AGAIN LISTED AS A ‘HOTEL SUPER CITY’ ALONGSIDE LOCATIONS SUCH AS SINGAPORE, BARCELONA, BEIJING AND CENTRAL LONDON 3

ECONOMIC GROWTH

Aberdeen’s success and investment trends are long-term and don’t simply reflect the up and down cycles of the oil price. It is these long-term trends which have driven the success of the region’s hotel and accommodation industry.

While media attention on Aberdeen recently has focused on the global oil price, business activity levels remain high. Indeed many companies are seeing this period as an ideal time to set down long-term roots in the region.

It is useful to reflect on two international companies who in the last year have moved to commit to a long-term presence here.

Statoil Statoil came to Aberdeen in 2012 and will move into its permanent office in Prime Four Business Park in 2016.

The office will initially host 200 staff supporting operations in the Mariner oilfield expected to produce for at least another 30 years. The Mariner field is the largest new offshore development in the UK in more than a decade with Statoil investing more than $7billion in the project.

Aker Solutions Aker signed Scotland’s largest office leasing deal in 2014. This is a 20-year arrangement covering 335,000 square feet and accommodating 1,500 staff initially.

The development will complete the first phase of the Aberdeen International Business Park near Aberdeen International Airport.

The full list of companies who have invested in new premises is significant and includes GDF Suez, Transocean, Apache, Subsea 7, Bibby Offshore, Wood Group and many others.

Aberdeen office take-up has grown rapidly in the past 10 years and in 2014 the annual take-up exceeded 1 million square feet which is the highest recorded figure to date.

Financial investment in Aberdeen’s long-term growth has never been stronger or more significant - the future looks bright.

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Aberdeen ranks second in the UK for average earnings per week and was one of only seven cities in the UK to see earnings growth during 2007-2014.

Image: Abstract Securities

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ECONOMIC GROWTH

Aberdeen is known for energy The energy sector is the greatest economic contributor to the region at around £3.6billion of Gross Value Added. The sector is a recognised global centre of excellence.

Go to any oil-producing province in the world and without exception they will highly rate the expertise in North-east Scotland. They may be a frequent visitor here (and perhaps stay in one of your hotels).

In a recent study by FTI consulting, almost threequarters of global executives (74%) agreed that Scotland is one of the world’s leading training grounds for the energy sector. The study found three quarters of respondents preferred working with Scottish suppliers or contractors, with the figure rising to 88% among US respondents. This suggests that that oil & gas executives will continue to visit Aberdeen for a long time too.

The sector drives economic growth, including the visitor economy although the custom is primarily a Monday to Thursday overnight stay group, leaving availability for leisure visitors on weekend breaks.

While Aberdeen is currently recognised as the Energy Capital of Europe, Westhill in Aberdeenshire is known as the Global Subsea Centre of Excellence. The two locations are just six miles apart. Aberdeen has earned itself an impressive and respected reputation in the industry with the biggest collection of international oil and gas companies outside Houston.

There is potential for a further 15-24 billion barrels of oil equivalent still to be extracted. This scale of reserves remains significant in a global context. It is forecast that production will continue to 2050.

The world’s biggest names in oil and gas have a presence here, such as BP, Shell, Hydrasun, Subsea7, Chevron, John Wood Group, Total, Apache, TAQA, AP Moller-Maersk, Aker Solutions, Ithaca Energy, Petrofac, Bibby Offshore and Technip.

Companies export to over 100 countries around the world.

Image: VisitAberdeen

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ECONOMIC GROWTH

Commercial property rental rates 35

150

30

25 90

20

15

60

10 30 5

0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Brent Crude Oil Price ($ per barrel)

Prime Office Rents (£ per sq.ft.)

120

There are 26,900 businesses in the region and it is easy to assume that the economy mirrors the price of oil. This is not the case, as the chart shows using change in rental prices as a measure.

0

Key Prime Rents

Brent Crude Oil Price

Our region’s success is critical to achieving the Scottish Government Oil & Gas Strategy which targets total supply chain sales of £30billion by 2020 and for the international share of those sales to account for 60% (£18billion) by 2020.

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ECONOMIC GROWTH

It’s not all oil and gas!

The turnover for Aberdeen City & Shire enterprises in 2013 was over £68billion and there are many successful non-oil companies, especially in the finance and business services sector.

Technology development is critical to the region. The region is a contender for the delivery of the world’s first commercial scale Carbon Capture and Storage facility at the Gas Electricity Generation site at Peterhead as well leading the way in hydrogen technologies.

In fact, energy companies in Aberdeen only make up 6% of the enterprises located here, whereas 21% are financial and business services companies and 14% are food and drink companies.

Aberdeen Asset Management Aberdeen Asset Management had an annual turnover in excess of £1billion in 2013, which was a 24% increase on the previous year. The company has a global presence, with its headquarters in Aberdeen, and is now the largest listed fund manager in Europe.

Almost half (45%) of Scotland’s top 20 companies are based in Aberdeen City & Shire. The area has around 10% of Scotland’s population.

FirstGroup Of Aberdeen’s top 20 firms, FirstGroup has the highest annual turnover at £6.9billion. FirstGroup has its £20million headquarters in Aberdeen at a site covering eight acres. FirstGroup is also a key player in the Aberdeen Hydrogen Bus Project, which is supporting the aim to make Aberdeen a world-leading city for low carbon technology.

Image: Newsline Media

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ECONOMIC GROWTH

What else?

Food & drink The food & drink industry is the second highest contributor to regional GVA at £484million and also has the second highest percentage share of enterprises in the region at 14%. The food & drink sector has particular strengths in agriculture, food processing and fishing and over a third of the region’s companies are exporters. The Aberdeen International Street Market visits three times a year (reputed to be the largest continental market in the UK). Many of the local restaurants and hoteliers benefit from the provenance of local produce.

Creative industries There are over 1,500 businesses currently active in the creative sector. The sector accounts for the employment of 6,200 people and generates £387million for the region (2012). The sector focuses mainly on design, fashion and textiles, software and architecture. Aberdeen has numerous cultural venues (His Majesty’s Theatre, the Music Hall, the Art Gallery, the Lemon Tree and Aberdeen Arts Centre). It is also host to a number of arts organisations, including Peacock Visual Arts and CityMoves (a dance company).

Life sciences The region has the only significant cluster of life science activity outside Central Scotland. There were 55 firms employing 1,000 people in the region in 2012, including companies at the cutting edge of science and with strong relationships to research and academia. The sector generated £39million for the region (2012).

Aberdeen boasts two world-class universities, both with a focus on skills the city will need in the future. In total, over 33,000 students are based in the area hailing from over 120 countries.

A great place to which to attract staff In late 2014, Aberdeen was ranked the best city to live and work in Scotland and the second best in the UK

by PwC [Good Growth for Cities 2013]. Aberdeen has previously been awarded the accolade of ‘happiest city in the UK’ by the Office for National Statistics (ONS).

Images: VisitAberdeen

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VISITOR ECONOMY Tourism The city has ‘surf’ to the east, mountains to the west with a hinterland full of world famous castles, golf courses and built heritage.

Tourism sector productivity in Aberdeen is double the UK average, generating £33,500 of GVA per employee compared to £17,000 nationally.

Tourist expenditure between 2009 and 2012 also increased by 35% with a target to increase this by a further 50% by 2020.

Aberdeen has a strong cultural infrastructure and in the last few months alone Aberdeen has welcomed West End shows including Jersey Boys, Shrek and the Bodyguard and in June 2015 it will welcome Elton John to a sold-out outdoor arena.

The ‘Granite City’ has vast green spaces. The region boasts 16 parks and gardens and Duthie Park attracts over 800,000 visitors each year. Aberdeen is also home to many of Scotland’s finest golf courses including Royal Aberdeen, host of the 2014 Scottish Open, Cruden Bay and the new Trump International Golf Links. All three are ranked in the world’s top 100.

Competition for the retail pound is fierce, with six shopping centres offering a total of around 150 shops, as well as Union Street catering for the shopper.

Union Square is the newest and biggest centre attracting a vast choice of new retailers to the city. The well established and recently refurbished Bon Accord and St Nicholas shopping centres have recently announced further multi-million pound redevelopment proposals.

Aberdeenshire has other significant tourism destinations at Royal Deeside, the Cairngorm National Park and Banffshire coast. One thing is for sure you are never short of things to do during a weekend break in Aberdeen or the North-east.

Image: Aberdeen City Council

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“The architecture of Aberdeen is stately and serene” TripAdvisor

Established in 2013, VisitAberdeen was created to maximise the potential of business and leisure tourism industry.

Investors in the sector are now beginning to see the fruits of this with increased volumes of leisure and business tourism.

Aberdeen plays host to a number of arts & cultural festivals each year including Aberdeen Jazz Festival (18-22 March), May Festival (2931 May), Aberdeen International Youth Festival (24 July – 1 August), DanceLive (9-20 October).

Throughout Aberdeen City & Shire we have a clear Regional Tourism Strategy – Building on our Strengths for 2013 – 2020 (led by the regional Tourism Partnership) Read the full document bit.ly/1BxLMXt 11

VISITOR ECONOMY

Business tourism Around 50% of overseas visits to Aberdeen are for business purposes, far higher than the 17% recorded for Scotland overall.

In 2014, Aberdeen rose to 11th position in the British Meetings and Events Industry Survey of the best UK destinations for business tourism and events. The city already hosts numerous high profile conferences, the largest being the biennial global Offshore Europe conference. This event attracted more than 63,000 delegates from over 100 countries in 2013, which was a record number of visitors to the event and an increase of more than 30% on 2011 figures.

Aberdeen International Airport case study Regional confidence is high following the recent acquisition of Aberdeen International Airport. The airport welcomes more than 3.5million passengers a year and has seen around a 40% increase since 2003 against a UK average of 14%.

Aberdeen is one of the best connected regional airports in the UK with daily flights to five of Europe’s international hub airports.

Approximately 20 airlines operate from Aberdeen International Airport which currently offers flights to around 40 destinations.

The Civil Aviation Authority recorded that Aberdeen Airport’s traffic consists of a high proportion of business travellers (61%), the highest proportion of the UK’s main airports. To give some perspective, Heathrow’s proportion of business passengers is 30%.

Around 342,000 business trips are made a year to Aberdeen. This is equivalent to 1.15million overnight stays.

Image: VisitAberdeen

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VISITOR ECONOMY

2015 conferences

Aberdeen welcomes a number of conferences in 2015 Aberdeen City and Shire Tourism Conference 28th January 2015 Subsea Expo 11th – 13th February 2015 100th International Instructors Course 13th – 15th March 2015 United Kingdom Continence Society 25th March – 27th March 2015 Scottish Gas Age Group Swimming Championships 1st April - 5th April 2015 Routes Europe 12th April – 14th April 2015 Offshore Well Intervention Europe 15th – 16th April 2015 Society of Latin American Studies 17th and 18th April 2015 Junior Chamber International – Scottish National Conference 17th April -19th April 2015 Energy Cities Annual Rendezvous 22nd April – 24th April 2015 VisitScotland Expo 22nd April – 23rd April 2015 Association of Paediatric Anaesthetists Of Great Britain and Ireland 13th May – 15th May 2015 European Society for Rural Sociology 18th August - 22nd August 2015 SPE Offshore Europe 8th September - 11th September 2015

“A cosmopolitan vibe, busy arts calendar and buzzing café culture” World Travel Guide Image: VisitAberdeen

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HOTEL PERFORMANCE Aberdeen has a mature hotel market, with all segments represented, including privately owned, small hotels, boutique hotels, and full-service four-star & five-star hotels. It is one of the strongest hotel markets in Scotland and consistently delivers results in excess of other cities in the UK. Hotel accommodation is often reserved a year or more in advance during major events and rates can increase by 700%.

Hotel sector performance in Aberdeen is amongst the best in the UK and the city features in 32nd place in the top world cities. Aberdeen’s performance is the strongest in Scotland and outperforms major UK cities such as Liverpool, Manchester and Birmingham.

The sector’s performance is driven by robust business and leisure economies and strong long term growth prospects for the region.

The table on the right demonstrates Aberdeen’s strong performance from 2012 to 2014 showing that occupancy remained high (with a year-round figure of 75%) and a significant increase in achieved average room rate (AARR).

The weekday occupancy figures are regularly interpreted within the industry and indicate demand exceeds supply and that business is frequently turned away.

International hospitality brands represented in the city include Marriott, IHG Holiday Inn and Holiday Inn Express, Best Western, Hilton (Hilton, DoubleTree by Hilton, and Hilton Garden Inn), Accor (Ibis and Mercure) and Trump International.

Image of Meldrum House Hotel; VisitAberdeen

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Performance statistics 2012

2013

2014

Occupancy

77.3%

78.6%

77.0%

Avg. room rate (AARR)

£76.75

£89.17

£97.65

Revenue per available room (RevPar)

£59.35

£70.10

£75.17

Source: STR Global Annual figures, 2014 15

HOTEL PERFORMANCE

Case study The Marcliffe Hotel is one of Aberdeen’s five-star hotels. In 2014, it had been earmarked for a major residential development by the retiring owner but in a vote of confidence for the region it is now to remain open and upgraded.

Image of Marcliffe: VisitAberdeen

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HOTEL PERFORMANCE

Further evidence of the strong performing market comes from the BDO report on the ‘guide to the performance of hotels in the UK’. The 2014 report cited Aberdeen as being the top performer of the regional cities with an increase of 17% of RevPar (referred to as room yield in the report). The average UK increase was 3.5% and based on an average roomrate of £71.22, two further comparables that demonstrate Aberdeen’s exceptional performance.

The BDO study also showed that the compound annual growth rate (CAGR) for achieved average room rate (AARR) was 5.7%. This is the highest recorded for any UK destination, including London, for which the comparable figure was 5.4%.

This study analysed hotel performance across 37 UK destinations, from

Aberdeen to York, including Edinburgh and Glasgow.

The HRG Hotel Survey monitors hotel rates across 55 top cities which are classified as ‘Super Cities’ because they defy national trends. Aberdeen is one of only two ‘Super Cities’ in Scotland and one of just six in UK markets. Aberdeen is also the second most expensive destination in the UK after London.

Aberdeen’s status as an international destination and as one of the strongest hotel markets in Scotland is also reflected in the level of brand penetration, with 73% of the city’s rooms operated under recognised hospitality brands (AM:PM Hotel Market Snapshot, March 2014), a higher proportion than the level found across Scotland and the rest of the UK.

38.3% OF ROOMS WERE SOLD AT CORPORATE RATE (APRIL 2013)

ABERDEEN CURRENTLY OFFERS 5,095 BEDROOMS IN 65 HOTELS IN THE 2 – 5 STAR MARKET (SUMMER 2014)

ABERDEEN SAW THE HIGHEST REVPAR GROWTH (18.1%) IN 2013 OF ANY UK CITY UP TO £70.10

Image of Malmaison: VisitAberdeen

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HOTEL SUPPLY AND DEVELOPMENT PIPELINE Demand exceeding supply

Almost two-thirds of the respondents to a recent survey of hoteliers noted that Aberdeen has significant periods where additional room supply would be welcome.

In addition, almost all respondents expressed the view that there was ‘unsatisfied demand’ in Aberdeen, particularly in relation to luxury accommodation and the midweek business market. This is unsurprising given the high volume of business travellers and mix of affluent visitors attracted to Aberdeen’s high-end retail and visitor offer suited to higher spend demographics.

The hotel market in Aberdeen is characterised by a pattern of regularly occurring periods when the city’s hotels are effectively ‘sold out’, and when demand still exceeds supply.

The three to five star market in Aberdeen and the immediate surrounding areas, recorded the following in an audit carried out in September 2014: • 5,095 existing bedrooms • 506 additional rooms opening by 2015 • 822 rooms with planning permission • Several large scale (100+ rooms) hotel and resort developments at an advanced planning stage These figures do not include existing supply in Aberdeenshire beyond the city fringes, which, in addition to Aberdeen hotels, currently meets a significant proportion of the midweek business market as well as having an established foothold in the leisure tourism market. It should be noted, Aberdeenshire hotels will experience shorter transport journey times to the airport and the city centre, once the Aberdeen Western Peripheral Route (AWPR) dual carriageway is completed in autumn 2017. This will allow more of Aberdeenshire’s hotels to compete for the business traveller market, and further development opportunities in Aberdeenshire will inevitably come forward.

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NO. OF ROOM NIGHTS SOLD 2014 1,382,438

Image: Drum Property Group

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HOTEL AND DEVELOPMENT PIPELINE

There are 65 hotels in Aberdeen and surrounding areas; 37 in the city and 28 in the city periphery.

The city has a predominance of three and four star hotels aimed at the mixed business and leisure market.

Almost 60% of supply is in the three-star market, yet there is high, often unsatisfied, demand, especially from business visitors, for four to five star hotels. A very good yet relatively small luxury five-star provision exists although there are several opportunities in the development pipeline to meet this market.

% HOTEL GRADES

Opening in 2015

8.

8%

35.2

2.2%

3.8%

5

Star Rating

Total

Hotels

Rooms

4

193

38

2994

20

1796

3

112

65

5095

In addition to the above, there are a further 506 rooms, which will all be operational by 2015 on the edge of the city at Prime Four Business Park and ABZ Business Parks, respectively: Opening

Hotel

Location

Opened Nov 2014

De Vere Village Urban Resort

Prime Four Business Park, Kingswells

Star 4

Developer De Vere

148

Oct 2015

Holiday Inn Crowne Plaza

ABZ Business Park, Dyce, Aberdeen International Airport

4

Dominvs

165

Jun 2015

Holiday Inn Express

ABZ Business Park, Dyce, Aberdeen International Airport

3

Dominvs

193

Total

Rooms

506

By the end of 2015, the supply of two to five star hotels in Aberdeen and surrounding areas will increase to 68 hotels (5,601 bedrooms) adding a further 193 rooms to the three-star stock and 313 rooms to the four-star offering.

Demand commentary Growth in Aberdeen’s hotel performance is driven by continued growth in the midweek business market. In addition, there are huge opportunities to grow the leisure market and to introduce new brands and products in different locations throughout the city region.

Forecast data indicates that in addition to the current stock, 2,525 further rooms will be required by 2025 to meet customer demands.

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5-star includes Marcliffe hotel, Chester hotel and Trump International

In a study commissioned by SDI in September 2014, it was estimated that based on occupancy, performance and underlying demand factors, an estimated growth rate of 3.75% per annum is anticipated in the demand for Aberdeen’s hotels. This results in an increase in trips, nights and spend rates of around 25% in the period from 2014 – 2020 and 50% for the period 2014 – 2025.

Assuming the past five-year occupancy levels of 75% are maintained, an additional 1,262 hotel rooms by 2020 or an additional 2,525 rooms by 2025 will be required to meet this demand.

HOTEL AND DEVELOPMENT PIPELINE

Image: VisitAberdeen

Confidence in continued growth There are currently 5,095 bedrooms with this number set to increase to 5,601 during 2015. In addition, and estimated at September 2014 there were a further 822 hotel rooms with planning consent in place throughout the city. Based on the above demand assessments, there are significant opportunities for further hotel developments beyond these numbers. Fortunately, developer and investor activity is high and there are a number of significant city centre schemes and business park opportunities at an advanced planning stage. While not meant to be an exhaustive list, here are some of the best examples coming forward in the development pipeline and at an advanced stage – some with operators signed:

ABZ Business Park

near Aberdeen International Airport In addition to the two new hotels opening in 2015, operators are in place for a further two hotels at the popular ABZ Business Park, adjacent to Aberdeen International Airport. Planning consent is granted for a new 200-bedroom hotel to be operated

by Marriott as a Moxy hotel, opening Summer 2016. Planning has been submitted for a new 156-bedroom hotel to be operated by Ibis, anticipated to open during 2016.

This adds considerably to the growing stock of high-quality large scale hotels at ABZ Business Park, serving the airport as well as the growing number of companies based there.

AECC (Rowett North)

near Aberdeen International Airport A 200-room 4-Star hotel is proposed adjacent to the new Aberdeen Exhibition & Conference Centre (AECC) development. There are two further proposals being planned in conjunction with the new AECC site. The second hotel will offer a further 150 rooms with the third to be confirmed.

Marischal Square City Centre

As part of the Marischal Square development, a new 126-room extended-stay fourstar hotel, to operate as a Marriott Residence Inn, is proposed. The hotel is being developed by Muse Developments and is expected to be complete by 2018.

St. Andrews Street City Centre

A proposal has been submitted by Northland Properties Corporation to develop fullservice four-star hotel project, to be operated as a Sandman Hotel Group brand. The hotel complex will consist of 220 rooms, a restaurant and convention facilities.

Trump International Golf Links Aberdeenshire

Planning applications are about to be submitted for the next phase of Donald Trump’s Trump International golf links and MacLeod House & Lodge Hotel. The application will include a ballroom and 30-bedroom staff accommodation building. This application comes just after a new site clubhouse was approved.

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HOTEL AND DEVELOPMENT PIPELINE

A healthy and active development pipeline The potential for further hotel developments as stand-alone or as part of mixed-use schemes in and around Aberdeen is significant. There are currently high levels of developer activity, particularly in the office, business park and leisure markets.

Aberdeen’s new business parks No less than six new high-quality business parks have emerged in the city since 2013, including three adjacent to Aberdeen International Airport. Strong take-up on pre-lets prior to construction is evident at all of Aberdeen’s new business parks, with deals at Prime Four and Aberdeen International Business Park capturing the largest office pre-lets in 2013 and 2014 respectively.

Prime Four Business Park in Aberdeen is a great and successful example of occupied grade A offices integrated with a modern four-star hotel complex, following the opening of the new De Vere Village, Aberdeen. Opportunities for immediately available sites coupled with investor willingness has never been higher.

New and established business parks, for consideration include:• Aberdeen International Airport Three new business parks, • ABZ Business Park • Aberdeen International Business Park • D2 Business Park • Prime Four Business Park - Kingswells • Westhill ‘surf city’ Business park (SURF is a reference to the subsea oil & gas sector) • The Core - Bridge of Don • Aberdeen Gateway - South of the City • City South Business Park - Portlethen

Image: Abstract Securities

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HOTEL AND DEVELOPMENT PIPELINE

City centre In addition to the business park growth, the city centre has found a renewed and collective focus for regeneration and development following the recent publication for consultation of the Aberdeen city centre masterplan. The masterplan has made good attempts to identify landowner intentions and investor appetite for sites and buildings in the city centre. The masterplan has also identified the need for more city centre hotels including the development of a Hotel Academy in the city centre to serve the region’s growing hotel market and investment in high standards of training for the tourism sector. The masterplan delivery programme includes the following:

Railway Station is a major new high quality central business district for Aberdeen accommodating a number of occupied grade A and headquarter offices with further large scale developments in plan. Situated between Union Square Shopping Centre, the River Dee and Aberdeen Harbour, the North Dee Business Quarter has witnessed dramatic changes, with the development of new high-specification offices taking place on a pre-let basis. The masterplan has identified this as Aberdeen city centre’s main office district, with early consultation proposals to create a new bridge over the River Dee and improve pedestrian links to and from Union Street and the railway station.

• More than 1,000 additional hotel rooms at Woolmanhill, Castlegate, South Dee and Guild Street

Overall, the masterplan proposes the creation of 43,600 sqm of pedestrianised areas, 56,200 sqm of open space, 1,500 new city centre homes as well as 100,000 sqm of new office accommodation. The draft plan also highlights a number of key city centre development opportunity sites where hotels would be considered in isolation or as part of new mixed-use schemes.

• Hotel and retail academies are proposed to help people develop skills and experience in these sectors The North Dee Business Quarter in Aberdeen city centre, adjacent to Union Square Shopping Centre and Aberdeen

The masterplan proposes the creation of 43,600 sqm of pedestrianised areas, 56,200 sqm of open space, 1,500 new city centre homes as well as 100,000 sqm of new office accommodation

Development opportunity sites are identified in purple on the attached plan and further information can be obtained from the masterplanning team at the following website: bit.ly/1E377xT

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HOTEL AND DEVELOPMENT PIPELINE

Confidence in growth – supporting developments A number of developments, including major new infrastructure projects, are committed or at an advanced investment stage.

These will be taking place over the next few years to improve Aberdeen and the region with a strong focus on improving infrastructure and transport facilities.

Construction of the Aberdeen Western Peripheral Route and dualling of the A90 Balmedie - Tipperty is now ‘on-site’ and will cost around £750million.

Other major transport projects include the £15million redevelopment of the main terminal at Aberdeen International Airport and the construction of a third River Don crossing, as well as rail service and infrastructure improvements.

Aberdeen City Council has formally approved investment in a new £333million exhibition & conference centre (Aberdeen Exhibition & Conference Centre). The centre is being delivered with the council’s development partner, Henry Boot and will include two hotels and a commercial development. The plans allow for increased business tourism, conferences and concerts. Funding approval was given in February 2015 proving the city’s confidence in its long-term economic growth prospects, including the growth of business and leisure tourism.

Aberdeen Harbour Trust has advanced plans to invest over £400million into a new harbour to the immediate south of the existing harbour at Nigg Bay. The development is cited in Scotland’s National Planning Framework as one of Scotland’s 13 National Developments. The investment in the new harbour is required to capture unmet demand and to secure Scotland’s role in the oil & gas and energy sector in a European context.

And finally, the region is currently in formal negotiations with the UK Government to secure a potential City Deal investment. This would unlock government funding to support the growth of the oil & gas sector in Aberdeen, as well as other sectors in the region. The Aberdeen City Deal could see up to £2.9billion of further public and private investment in the region.

Construction of the Aberdeen Western Peripheral Route and dualling of the A90 Balmedie - Tipperty is now ‘on-site’ and will cost around £750million

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HOTEL AND DEVELOPMENT PIPELINE

Aberdeen Harbour Trust has advanced plans to invest over ÂŁ400million into a new harbour to the immediate south of the existing harbour at Nigg Bay

Image: Aberdeen City Council

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NEXT STEPS This document hopefully illustrates that Aberdeen’s success is based on a longterm trend, which is set to continue for future generations. The city has consistently been ranked amongst the top UK economic performers since 2003.

The region has attracted investment in new leisure and retail offerings from high-quality city centre retail to diverse outdoor sports and golfing resorts in Aberdeenshire.

This investment in turn is attracting increased volumes of weekend visitors benefiting from lower occupancy rates as the ‘working week’ visitors leave the city.

Hotel data shows Aberdeen as consistently achieving one of the highest occupancy rates and the highest levels of revenue in the UK even as the supply of new hotels enters the market. It remains true that the hotel bed space supply remains constrained and that a gap in the high quality four and five star hotel market still exists. Immediately available investment opportunities in new developments are identified, with willing investors, particularly in the city centre, and the new business parks. Prospects for further hotel developments around the new business parks at Aberdeen International Airport and the proposed new exhibition and conference centre remain high. These opportunities are varied with unsatisfied high demand from business tourists (weekdays) and a growing weekend break and leisure tourism market (weekends).

Aberdeen: a Hotel Supercity If this document has provided you with food for thought and you would like any more information about Aberdeen and the region, or opportunities in the Aberdeen hotel market please contact the Chamber of Commerce on 01224 343900 or research@agcc.co.uk or SDI on 0141 228 2828.

If you would like references for any of the statistics quoted in this document please contact Kirsten Irvine at research@agcc.co.uk 26

In 2014 Aberdeen was the second highest ranking UK city for employment (77.9%) and has the lowest unemployment rate (1.3%) of all of Scotland’s cities

SUPPORTING DOCUMENTS • Scottish Enterprise International Oil and Gas Survey • Aberdeen City Centre Masterplan: www.aberdeencity. gov.uk/council_government/shaping_aberdeen/City_ Centre_Masterplan.asp • ACSEF Economic plan - www.acsef.com/downloads/5_ Year_Economic_Action_Plan.pdf • Scotland’s Oil & Gas strategy: www.scottish-enterprise. com/~/media/SE/Resources/Documents/MNO/Oil-andGas-strategy-2012-2020.pdf • AM:PM Hotel Market Snapshot, March 2014 • An approach to the Economic Assessment of the Arts & Creative Industries in Scotland, 2012 • BDO Hotel Britain 2014: Guide to the performance of hotels in the UK • VisitAberdeen - www.visitaberdeen.com • Aberdeen Invest Live Visit www.aberdeeninvestlivevisit.co.uk • www.acsef.co.uk/uploads/fileUploads/Final%20 ACSTP%20Strategy.pdf Image: Aberdeen City Council

• Aberdeen Hotels Supply and Demand Audit, A report for Scottish Development International, January 2015 27

ABERDEEN

A hotel supercity Summarising Aberdeen’s economic strength, hotel occupancy statistics and an overview of the current hotel supply and new hotel developments.

A must read for hotel operators and investors with an interest in the Aberdeen City Region area.

In partnership with

The contents of this report are intended to provide general information. The report does not constitute professional advice and should neither be regarded as comprehensive nor sufficient for making commercial decisions. The content of this publication does not constitute a contract between any of the partners and you. We have made every attempt to ensure this publication has sourced data from reliable sources but accept no responsibility or liability for damage and loss in connection with the use of information, expressions or opinions that are contained in this publication.

Cover image courtesy of Aberdeen City Council