Making Room: where next for Scotland’s hotels market?

Hospitality conference season is in full swing and, following several weeks of discussion across the sector, a number of consistent themes are emerging.

Nobody is pretending the market is easy. Deals are taking longer to progress, development viability remains challenging, and rising employment, energy and other operating costs continue to put pressure on margins. Add wider economic uncertainty and, in Scotland, the introduction of visitor levies, and owners, operators, developers and investors have plenty to navigate.

Against that backdrop, Scotland’s underlying hotel fundamentals remain strong. Edinburgh retained the top spot in Colliers’ 2026 UK Hotel Development Index, while Glasgow also ranked in the top five. Recent transactions further demonstrate that capital remains available for the right assets, although investors are increasingly selective about where and how they deploy it.

That selectivity matters. Scotland is not a single hotel market: Edinburgh, Glasgow, and Scotland’s resort and leisure destinations each have distinct demand drivers and offer different opportunities. Even within individual markets, simply adding more bedrooms is unlikely to be enough. Edinburgh’s strong trading performance continues to attract development activity, with rooms currently under construction equivalent to around 9.5% of existing supply. This makes the strength of the underlying proposition increasingly important.

From a real estate perspective, one of the most notable trends is the continued focus on conversion and repositioning. In Edinburgh in particular, demand for the best office space remains strong, but a growing divide is emerging between prime offices and older stock which no longer meets occupier requirements. For the right building, conversion to hotel use can provide an alternative route forward, and several office-to-hotel schemes are already progressing in the city.

But “could this be a hotel?” is only the start of the conversation. The right building must be matched with the right offering. Brands and operators have different requirements for room size and configuration, amenity and F&B space, servicing, and back-of-house provision. A building that works for one concept may simply not suit another. Early alignment between owner, brand and operator can therefore be fundamental to viability, particularly when working within the constraints of an existing building.

Mixed-use development is another area to watch. Branded residences are expanding rapidly internationally, particularly in the luxury market, and may increasingly feature in discussions about Scottish hotel developments. Combining hotel and residential uses can create a different commercial proposition, but it also introduces additional complexity around ownership, operation, branding, and the relationship between the different elements of a scheme.

Looking ahead, development viability and operating costs are unlikely to become significantly easier in the short term, while investors will remain selective. The result may be a market focused less on simply creating more hotel rooms, and more on getting the proposition right from the outset: the right building, brand, operator, structure and target market.

For Scotland’s hotels market, that is where the most compelling opportunities are likely to lie.