Forward demand around Edinburgh Fringe falls behind last year

Edinburgh Fringe has often driven success for the capital’s hotels. As an influx of visitors flock to see the festival’s performers and comedians in action, hotel occupancy and rates increase – ensuring hoteliers enjoy the festival’s last laugh. 

During the 2016 and 2017 festivals, Edinburgh hotels reported increases in revenue per available room (RevPAR), +8.0% and +11.1%, respectively, as both occupancy and average daily rate (ADR) grew. This was predominantly driven by year-over-year increases in hotel rates, with ADR rising 7.2% in 2016 and 9.2% in 2017 as it reached an average of GBP165.45 for the latter festival. 

However, in 2018, a 2.0% decline in occupancy and softening ADR growth (+3.9%) led to RevPAR growth of just 1.8%. Is this trend set to continue across the 2019 festival? And with a rising number of Airbnb and other short-term festival lets available in Edinburgh, as well as increasing hotel supply, what does the future hold for hotel performance during Fringe?

Hotel demand currently sits behind the last year’s pace

As of 29 July, just 4 days prior to Fringe 2019, hotel bookings were trailing behind 2018 levels on 22 of the festival’s 25 nights. With one night on par in terms of forward-looking occupancy and only two nights ahead of the previous year, there is indication that occupancy during the festival will decline in comparison with 2018.
 

Are Airbnb and other festival lets to blame? Possibly, yes. It has been reported that there are 12,000 Airbnb properties in Edinburgh, half of Scotland’s total, and in 2018 60% of these listings were for fewer than 30 days.  

In comparison, the Edinburgh hotel market comprises 15,894 rooms across 239 properties. Inventory increased in each of the 8 quarters leading to Q1 2019, growing at an average rate of 4.9%, which also has its own impact on hotel occupancy. STR’s latest Market Forecast report projects that Edinburgh supply will grow more aggressively between Q3 2019 and Q3 2020—at an average rate of 7.9%.

Analysing the dynamic between the two forms of accommodation, STR’s Edinburgh Visitor Survey shows that approximately 55% of leisure travellers have stayed in hotels over the past 4 quarters, with 20% opting for Airbnb properties and similar apartments. For the first time during the key tourism period of Q2 and Q3 2018, the proportion of leisure visitors staying in hotels fell below 50%. 

It is possible that festivalgoers have been waiting last minute to book their accommodation this time around, or that Edinburgh’s trend for occupancy decline that has been witnessed in five of the first six months in 2019 is also affecting the festival period? Only time will tell whether attendees are waiting last minute or if there are legitimate grounds for concern among hoteliers in the long run.