Tightening the reins?

Hotel operators have had the run of the Midtown market over the past few years but a pick-up in office demand is making life more competitive for budget hoteliers. Stacey Meadwell reports Hotel operators have enjoyed a relatively free rein in Midtown over the past few years. Its proximity to the West End and a stagnant office market provided the buildings that built activity in the hotel sector. But could the ride be over? Dominic Murray of Knight Frank says: “The office market has picked up, therefore hotel operators will have to outbid office developers.” Whitbread is looking for space in Midtown for its Travel Inn brand budget hotel. Sarah Holder of agent Healey & Baker agrees that it is difficult. She says: “The improved office market is making it harder for budget brands to get buildings.” Killiam Morris of Davis Coffer Lyons believes the problem is even worse because of the type of stock required. “In order to keep construction costs low, the budget operators need a certain template in a building. Therefore, the cellular offices of the 1960s tend to suit their needs. “Unfortunately, Midtown provides more options for three- and four-star operators that can go into the older-style buildings,” he comments. This would seem to be the case with Jurys Doyle Hotel Group’s plans for a £23m, 170-bed, four-star hotel at the Grade-II listed Central Club on Great Russell Street. The operator is in the process of buying the building and already has planning permission for the refurbishment. The purchase shows that some older buildings are still perceived as a good deal. Indeed, Walter Beatty, chairman of the group, says that the company’s strategy in central London has been “to move swiftly to secure the opportunity at a good value price”. DCL’s Morris insists that the budget hotels are pushing the market and Healey &Baker’s Holder believes that the general market will continue to be active: “Ramada’s interest in the old Pearl Assurance building at 252 High Holborn was the catalyst. However, there has been a lot of talk and only one hotel has come out of the ground so far.” A number are expected to complete over the coming year (see map, p113). Meanwhile, at Chancery Court Hotel – 252 High Holborn – owner New World has yet to announce an operator, despite being on site. Operators other than Whitbread looking for space include Stakis and the Groucho Club. John Anderson, chief executive of Burford, which is developing a 202-room hotel with Shrager in Midtown, highlights the appeal of the area: “The Park Lane strip is not convenient for theatre-land and restaurant-land, and hotels should be in busy areas within walking distance of the nightlife.” He adds that it is this that will fuel the area’s success. “There will be more operators looking for sites and so there should be because of the location,” he says. Bars and restaurants A tight squeeze Restaurant and bar operators are feeling the squeeze in Covent Garden. Westminster council is continuing its policy of tight planning guidelines and restricting licences, and lobby groups such as the Covent Garden Action Trust add a third hurdle for those wanting to set up in business. Tracey Mills of Davis Coffer Lyons says that barring Sunday and Bank Holiday trading and opening after midnight alongside “vertical drinking restrictions” – when drinking is allowed only at a table – are just some of policies that can deter operators. Trevor Shelley of Shelley Sandzer points out that, with high rents, such restrictions on trading hours mean that it is not financially viable for some operators to open up. However, demand still remains strong, according to Nick Ware of Jones Lang LaSalle, particularly from the major bar and restaurant chains. Tony Moore of EA Shaw is concerned about this. “If you restrict the number of restaurants, the big chains will be the only ones that can afford to be in Covent Garden and you end up with a limited range,” he says. “There are surprisingly few top-quality restaurants.” Ware disagrees that there is a problem. “Big chains aren’t just the likes of McDonald’s – names such as Belgo can afford to be in Covent Garden,” he says. Indeed, the Belgian-themed chain is one of the few operators that has successfully negotiated the planning minefield. Greenall’s Henry’s has also taken a unit on Henrietta Street, according to Moore, but it was at what he describes as a “very high” rent – £915 per m2 (£85 per sq ft). Site bar and restaurant is also taking 743m2 (8,000 sq ft) on Tower Street. Like retailers (see Retail p104), the food and beverage sector is having to look to the peripheral areas for space. Mills says that operators are spreading along Drury Lane and Great Queen Street. Ed Humbert of DTZ Debenham Thorpe believes Kingsway is growing in popularity because it is on the fringe of Covent Garden. Several operators are taking space there, including PizzaExpress, Fullers’ Fine Line concept and Youngs’ Bar Columbia. DCL’s Mills believes this area is a different market because it still caters a lot for the office trade. “People acquiring space on Kingsway are still looking at Covent Garden,” she adds. Humbert counters: “Kingsway has become the restaurant location for High Holborn.” However, he does not believe that it will become the “mecca of fine dining”. Shelley is surprised by the lack of good-quality restaurants in the area. “There is a substantial deficit of restaurants and I don’t understand why it hasn’t happened now that office developments are being let. Smithfield has taken off as a restaurant location. One argument is that there isn’t the weekend trade, but you can say the same about the City,” he comments. Some units coming on to the market are at the ground level of office developments. Frogmore’s development at 77 Kingsway is one example. Michael Dibley of Farebrother, joint agent with Nelson Bakewell, comments: “The 5,500 sq ft, A3 unit is under offer to a national bar-restaurant operator. “The former Lloyds banking hall at 67 has also recently been vacated. This unit will appeal to a number of A3 operators and when let should complete the transformation of this end of Kingsway as an established destination for leisure activities in the core of Midtown.” Chris Blair of Blair Kirkman believes that A3 operators act as a catalyst for others. “Helical Bar’s development at 67 Kingsway will probably go to A3 [at ground level]. A3 deals tend to attract others and interest in the area will be maintained,” he says. Hotels in Midtown Alongside an improving office market, developers are boosting the number of hotel beds in the Midtown area Proposed 1 Royal Scot Hotel, 100 Kings Cross Road, WC1 28-bedroom extension 2 Ryan Hotel, 2 Gwyne Place, WC1 18-bedroom extension 3 Mountbattan Hotel, Monmouth Street, WC2 28-bedroom extension 4 Tavistock Hotel 41-bedroom extension on eigthth floor of hotel 5 British Museum Study Centre and Hotel, 21-31 New Oxford Street, WC1 258-room budget hotel, construction to commence in June – rumoured to be Granada Travelodge 6 Kingsway College, Penton Rise, Angel, WC1 Proposal for 314-bedroom budget hotel. Planning application submitted last November. Due to be heard at planning committee shortly 7 Central Club, Great Russell Street, WC1 170-bedroom four-star. Planning permission granted for refurbishment. Proposed opening autumn 2000 8 Liverpool Victoria building, 36-37 Southampton Row Owner Blackfriars is considering 288-325 bedroom hotel or offices Total rooms: 696-1,021 Hotels constructed, redeveloped, extended in past 18 months 1 Royal National Hotel, Bedford Way, Bloomsbury, WC1 Redevelopment of hotel which comprises 350 bedrooms. Completed August 1998 2 No 1 Aldwych, WC2 107 bedrooms, opened July 1998 3 Orion, 18 Northumberland Avenue, WC2 186-bedroom apartment/ hotel opened March 1998 4 Travel Inn, Euston Road, NW1 225-bedroom budget hotel Total rooms:868 Hotels under construction 1 Stakis, Cockspur Street, Trafalgar Square 131 bedrooms 2 42-49 St Martins Lane, WC2 204 bedrooms in Burford-Shrager joint venture. Due to open October 3 252 High Holborn, Chancery Court Hotel, WC2 Proposed 376-bedroom hotel. Laing Construction is on site. Owner is New World Developments 4 Kings Way Hall, 66-69 Great Queen Street, WC2 170-bedroom hotel due to be completed in September 1999. (No information about operator or star rating) 5 Holborn Hotel, (Sentinel House), Southampton Row, Holborn, WC1 210 bedrooms. Being developed by Global Grange Hotels. Due to open in December Total rooms:1,091 Source: Jones Lang LaSalle Hotels