• Hoteliers in London charge

The Olympics may be over, but the race to build more hotels in London is far from over. Recent weeks have seen a range of deals done, and permissions granted, as a variety of international operators set to work creating additional hotel space in the UK capital.

The moves come as planners have indicated that the glory days of hotel conversions in London may be over. While the economy was weak, they have been content to see older office buildings turned over to new uses such as hotels and residential.

But with an economic upturn now looking likely, city authorities are looking to prevent further loss of office space. In addition, a new local development tax, the Community Infrastructure Levy, will also start to be charged on developments, adding further costs to hotel building in the London region.

The biggest recent spender is Shiva Hotels, which has paid GBP87.6m for a Thames-side office building that has permission for hotel conversion. Previous owners of Millennium Bridge House obtained consent for the change of use, to deliver a 348 room hotel, in 2009 and subsequently – presumably due to a lack of interest from hotel operators – also obtained permission for a major office redevelopment of the building on the site.

Shiva has not said which brand will flag the building, which sits immediately south of St Paul’s cathedral and faces the Tate Modern across the river; but Shiva has a strategic development agreement with Hilton across all its brands in the UK. The building comes complete with some existing office tenants, who will have to be moved out before any conversion starts. Millennium Bridge House is one of three hotel sites given permission with a 1km stretch of the riverside, but is the first to see a commitment from a hotel developer.

In the City, London’s financial district, Asian budget operator Dorsett Hospitality recently secured permission to build a 275 room hotel in Aldgate, replacing a tired office block. This will be Dorsett’s second hotel in the capital, as it already operates one to the west in Shepherd’s Bush.

Also in the City, and opposite Bloomberg’s new office development, plans are advancing for a major boutique hotel in a former bank headquarters. The listed building has consent previously granted for a six star, 183 room conversion; now, operator Soho House with backer New York hotel developer Sydell Group, is planning a 255 room scheme that will likely win approval in spring 2014. The revised scheme will use the marble banking halls as the hotel reception, while a basement vault – famous as it was used in the James Bond film Goldfinger – will form a trendy bar. A rooftop swimming pool is also promised in the revised plans. 

There is clearly a move to smaller, perhaps windowless rooms in a bid to provide budget priced yet comfortable accommodation in the increasingly expensive city centre. Whitbread has just obtained approval for an additional 119 room Hub hotel created from empty offices in the capital’s financial district, adding to its pipeline of five such projects in the city.

Elsewhere, developer Criterion Capital is pushing forward the newly emergent pod hotel room concept. The company is shortly starting work on a 24 month conversion of the Trocadero building off Leicester Square, to create a 500 room hotel which will have a majority of its rooms without external windows. It also recently obtained permission to convert former offices in Edgware Road to create a 108 room pod hotel, where all the rooms will be windowless. Criterion is confident that a growing number of operators are getting into this space, and it will be signing up an operator during construction.

HA Perspective: London is such a bankable location for hotels it seems amazing that no-one has thought of it before. Oh no, wait…..

The Olympics heralded a new era of luxury in the capital but now, aided by restrictions on office conversions and the city’s reputation for being a bit pricey, it is the turn of the economy sector, with brands being increasingly important to secure a return on those pricy London developments.

This pressure on sites may have helped the Trocadero development along, a project that has seen so many different incarnations that this correspondent had adopted an ‘I’ll believe it when I see it’ approach. However, the area around the Trocadero has added hotels in the form of a Premier Inn and W in recent years and is now a better prospect for hotels. Previously the site has been linked to Accor brands, but time will tell on the pod incarnation.

Pod hotels, while using the kind of rapid construction processes that fit in with London’s busy streets and red-tape-heavy local authorities, do not lend themselves to lengthy stays, although are welcomed by the domestic market. Yotel’s foray into New York saw them forced to install windows as part of local building requirements, although space remains a challenge for guests. In London hotels will be hoping that the bright lights of the West End will be sufficient illumination for visitors.

 

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