Boosted by an upturn in tourism, new sources of finance and a return of business confidence, hotel construction is set to remain one of the fastest-growing sectors for some years, writes Richard Waite
More from: Hotel construction is booming in UK cities
Burgeoning budget hotel chain Premier Inn announced last month that it planned to build 170 new hotels in the UK by 2018.
The news came as no surprise to hospitality experts, who have been warning that central London is ‘under-keyed’ – an emerging phrase denoting a lack of available hotel bedrooms. Or, as Jestico + Whiles director James Dilley says: ‘As far as London is concerned, the demand for hotel rooms is insatiable.’
George Nicholas, of property consultancy Jones Lang LaSalle, says: ‘The ‘upturn in UK regional hotel operating performance, coupled with the weight of capital chasing hotel investment [will result] in a significant injection of fresh capital into the nation’s lodging stock.’ In a nutshell: the hotel business is booming.
One of the hardiest privately backed sectors throughout the economic downturn, hospitality looks set for an even more fruitful 18 months ahead, with Jones Lang LaSalle predicting hotel supply in the capital will grow by a further 8.3 per cent.
Nationally, there has also been a large hike in the number of planning approvals for hotels. Tom Crane, an economist at industry-tracker Glenigan, said: ‘[This] upturn signals the market beginning to pick up again, and the recent economic recovery is likely to strengthen demand from business travel.
Hotel construction will be one of the fastest-growing sectors in 2014
‘Hotel construction will be one of the fastest-growing sectors in 2014 and construction will be boosted over the next few years, due to competition between affordable hotel chains. Premier Inn has plans to expand, while international chains such as MotelOne and Marriott’s Moxy Brand will fight for space in the UK market.’
New sources of finance, a return in business confidence, better infrastructure (in east London, for instance), the rise of boutique hotels, the snapping-up of ‘distressed sites’ and even a proposed relaxation in visa rules for Chinese tourists have all been credited with driving the sector forward.
Gordon Ferrier, head of hotels at 3DReid, believes the ‘marked upturn’ is due to the improved flexibility over funding models ‘often because administrators are shedding distressed buildings that can be converted’.
He adds: ‘There’s a lot you can do with good fixtures, finishes and innovative manufacturing to bring a dead office back to life as a swanky metro stopover.’
Ryder Architecture partner Tim Jeffery says: ‘The demand in London is huge; it’s just a matter of finding the sites. [Hotel giant] Accor is looking for 1,000 rooms-plus just in the King’s Cross area. Any operator with the financial wherewithal will take leases. We have just been asked to look at turning a 30-room hotel into a single house. In my opinion, the pressure on fringe office buildings for change-of-use to hotels will increase, and that is where we are likely to see development.’
Ufi Ibrahim, chief executive of the British Hospitality Association, claims hospitality has been responsible for £12 billion-worth of construction work over the past decade. He says: ‘We’re confident that the government’s recent decision to simplify the visa restrictions for Chinese tourists will have a demonstrable effect on our industry, potentially increasing demand for hotels as well as encouraging Chinese investment into building new hotels, predominantly in the capital.’
Over the next 12 months, Jones Lang LaSalle expects an extra 5,846 hotel rooms to open in London, adding to the capital’s existing 127,424 bedrooms.
Jacqui Kirk, of hotel experts Dexter Moren Associates, says: ‘We’re seeing a number of international brands from America and Asia securing key sites in London. A lot of the established brands are developing and rolling out their own boutique brands – IHG’s Hotel Indigo; or Marriott, with its Edition and Autograph brands, for example.’
Derek Griffin, head of acquisitions for Greater London at Whitbread Hotels and Restaurants, the parent company of Premier Inn, observes that competition is ‘fierce’ in the hotels market, and adds: ‘The branded hotel sector will continue to expand on the back of changing consumer preferences for consistent, affordable accommodation in the best locations. The challenge for our architects is how to design attractive, new hotels within brand guidelines and to tight budgets. Being innovative is absolutely critical.’
However, Paul White, of Buckley Gray Yeoman, which has a ‘very strong’ pipeline of hotel projects for the next 18 months, has noticed a definite shift in design trends. He asks: ‘Is [Stride Treglown’s] Hoxton Hotel a hotel with a bar, or a bar with a hotel? There has also been a trend for making rooms particularly small, therefore driving people downstairs. The marble-and-chandeliers hotel lobby has gone, too. They are now more like living rooms.’
Regionally, the picture is not quite as rosy, though Jones Lang LaSalle predicts that Manchester, Birmingham, Glasgow and Newcastle will all see a greater than 10 per cent increase in hotel rooms in 2014.
Roger Stephenson, of stephenson:ISA STUDIO, says: ‘There has been a steady stream of hotels being developed over the past few years in Manchester at a time when development of virtually every other building type has ground to a halt.
‘There are still times when it is impossible to get a hotel room in Manchester. A combination of a United home game, a concert at the Arena and maybe outdoor events in the City will soak up all the available space.’
‘There will be significant development of hotels as part of the [Argent-backed] Airport City development, which has recently announced Chinese funding and which is an enterprise zone.’
Hotels were seen as a way of developing medium-sized sites without tripping the affordable housing threshold
But PH+ co-founder Andy Puncher issues a word of caution: ‘Until recently hotels were seen as a way of developing medium-sized sites without tripping the affordable housing threshold. Hotels do not count as residential floorspace, while offering better returns than pure commercial equivalents.
‘However, with the permitted development rights now allowing commercial-to-residential conversion more easily and values now climbing, maybe we’ll see a drop-off in hotel applications, certainly from our residential-led developers.’ n
Hotels in London set to complete in 2014
- Hub by Premier Inn Spitalfields, Aldgate East by EPR
- Pocket Shoreditch High Street by The Manser Practice
- Premier Inn London Holborn by Urban Innovations
- Ramada Encore London by ICA Architects
- Shepherd’s Bush Pavilion by BFLS
- Premier Inn London, Edmonton by Michael Sparks Associates
- Holiday Inn Express London, Southwark by Dexter Moren
- Premier Inn, Dalston by Dexter Moren Dalston
- Premier Inn, Hendon by Amos Architecture and Design
- Tobacco Dock, Shadwell by Dexter Moren
- Shangri-La at The Shard London Bridge by Dexter Moren
- Holiday Inn Express, Royal Docks by Dexter Moren
- Premier Inn London, Wandsworth Town by Carey Jones
- citizenM, Tower Hill by Sheppard Robson
- Hub by Premier Inn, St Martin’s Lane, Charing Cross by Axiom Architects
- Premier Inn, Archway by Axiom Architects
- MVMNT Boutique Greenwich by HLM and Studio Egret West
- Old Street Magistrates’ Court by Goddard Manton Partnership
- Mondrian London Southwark by TP Bennett and Design Research Studio
- Cheval Three Quays Tower Hill by 3DReid and Forme Design
- Ham Yard Picadilly Circus by Woods Bagot and Archer Architects
- Heston Hyde, Sanger Southall by Urban Innovations
- Beaumont Bond Street by Reardon Smith Architects