Economic Benefit? Maybe, but Where, and for Whom? A Closer Look at Edinburgh City Center’s Hotel Boom

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Artist’s Impression of the Caltongate development: Allan Murray Architects

Artist’s Impression of the Caltongate development: Allan Murray Architects

“The economic benefit of this new development is huge and is estimated to bring in £43m to the local economy each year, as well as creating almost 2,000 jobs.”

Councillor Ian Perry on the notorious ‘Caltongate’ Development.

Within Planning, It is an oft lamented truth that so-called ‘economic’ arguments for a development apparently allow the sweeping aside of almost any other concerns (like, for example, the social or environmental consequences of said development). The perceived importance of such arguments is clear in the above statement from Edinburgh Planning leader Ian Perry, weighing in on Edinburgh Old Town’s controversial ‘Caltongate’ development. Indeed there are many who see such priorities as well placed, particularly during the current economic climate. Perhaps it is necessary to prioritise the economy for now, and deal with wider concerns later? Two questions arise here: which type of developments will actually strengthen the local economy, and which will not? And; who is this stronger economy supposed to benefit. Questions one might assume government at all levels (desperately pursuing “sustainable economic growth”) would take very seriously. Evidence from the planning world however, suggests this may not always be the case.

To focus in on the capital, it would seem City of Edinburgh Council (CEC) have a penchant for budget hotels as part of ‘mixed’ developments – with several such sites springing up in the centre of town over the last few months. The Ibis housed within the new SoCo complex on South Bridge, and Motel One at East Princes Street are particularly dominant (and central) examples, and it seems likely that the 5 acre Caltongate site will follow a similar path, all in the name of economic growth.

Yet all the while a growing body of research suggests not only that developments such as these provide little benefit to the local economy, they may in-fact be detrimental to it.

“How?” you might well ask. For two reasons.

Firstly, these developments tend not to include businesses from Scotland, let alone the surrounding area, as such any financial gains rapidly leak from the local economy to international investment funds and the pockets of shareholders. Research from the New Economics Foundation has shown that money spent with a locally owned business is worth almost 400% more to the local economy than money spent with an externally owned business. Since, in the former scenario, it is re-spent time and time again within the locality. Furthermore they have calculated that while every £50,000 spent in small local shops creates one job, you must spend 5 times this number to get the same result in superstores. Nonetheless local businesses are almost completely absent from these developments taking place right in the heart of the capital.

SoCo picSouth Bridge’s ‘SoCo’ development for example, completed by Buckinghamshire based Jansons Property, combines a 259 bed Ibis hotel (owned by Parisian ‘Accor Hotels’), with a Costa coffee (London retail and leisure giant ‘Whitbread’) and a Sainsbury’s Local (English company whose largest shareholder is the State of Qatar).

Motel OneSimilarly, though the East Princes Street development has been handled by Scottish company Aberdeen Assets Management, the completed unit sees Berlin’s Motel One take charge of a 140 bed complex above three street level retail blocks with one of these contracted to Californian technology giant Apple.

Over in the Old-Town this trend looks set to continue in Artisan’s Caltongate site, with Premier Inn (England) set to take over 250 rooms for a budget hotel, while Artisan themselves are South African.

The second issue is that these sites primarily include hotels, as opposed to varied forms of accommodation, meaning visitors spend gets ‘stuck’ within the hotel premises. Research has long shown (Slee, 1998) that significantly less money per head spent within hotels stays in the local economy compared to money spent in self catered accommodation and guest houses. Hotel spend tends instead to be channelled to centralised wholesale producers and investors outwith the locality, providing little economic benefit to the people in the surrounding area. Are cheap central internationally owned hotels really what’s best for Scotland’s economy?

Edinburgh University Business guru, Stephen Harwood certainly doesn’t think so, indeed his research demonstrates how these developments are actually detrimental to the local economy. Harwood looks into the negative effect these central budget hotels have on once thriving locally owned guesthouses in the rest of town. With many of these properties now up for sale it seems these small, often family run businesses are simply unable to compete. A saddening fact as such businesses would support a much more robust local economy, than large internationally owned hotels. Perhaps development is not always in the interest of the local economy.

The point here is not that there shouldn’t be hotels in the centre of town, nor that these hotels should not be internationally owned. Presumably everyone can agree that international hotels can add to the variety and competition which are essential elements to any vibrant town centre. But if Planning decisions are to be made with economic interests in mind, we must ask whose economic interests and how.  CEC was not elected to promote South African, Qatari, French, German or English businesses; it was elected to promote the interests of the people of Edinburgh. As more and more budget hotels spring up in the centre, and more and more family-owned guest houses go out of business in Southside and Portobello, are they really achieving this?

author: Rurigdh McMeddes – Trustee

Slee, B. 1998, Tourism and Rural Development in Scotland, Tourism in Scotland, Thomson Business Press

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1 Response

  1. SimonB

    A belated comment from a ‘real’ person outside of the world of digital trawling!

    Well done on this article Rurigdh yet what a shame it has to date fallen on deaf ears, except the digital trawlers!

    I’ll reference it in my latest 38 Degree appeal. Here’s to a future that honors the guiding words of The Enlightenment inscribed on the Scottish Mace:

    Wisdom Justice Compassion Integrity

    Can we ever reconcile the sorry situation our ‘civilisation’ finds itself in when we are enslaved to the construct of money?

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