If all the hotels being proposed for Hampshire went ahead, 3,000 rooms would be added to the county’s stock. And in Dorset, schemes already coming out of the ground include two Hilton hotels in Bournemouth. Yet despite a flurry of planning applications, some observers question whether ?the market can sustain so much new hotel development.
Hotel Solutions has provided rolling research to Tourism South East and Hampshire county council since 2001. Apart from “hot spots” – opportunities for budget hotels and leisure-led schemes in rural areas – it says it will be 2016 before demand for beds might support full-service hotel development.
Andrew Keeling, a partner in Hotel Solutions, says: “Office and business park development and major regeneration schemes will need to lead the way to more robust levels of economic growth, which hotel development will follow.”
That point is echoed by Centre For Cities (see Southampton masterplan feature, pp98-99). There are 204 hotels in Hampshire with just over 11,600 bedrooms. Some 33 new hotels are planned, mainly in Southampton city centre and Portsmouth, but only six are actually being built.
Dorset also has some hotel developments in the pipeline. For example, Travelodge has exchanged contracts with the owner of the Saxon Square Shopping Centre in Christchurch for the construction of a hotel.
One proposal has already fallen foul of market conditions. Hampshire Cricket Club’s Ageas Bowl development includes a Hilton hotel, but its developer, Denizen, went into administration in October. Administrator Duff & Phelps was seeking another developer to take on the contract on at the time of writing.
Meanwhile, a major hotel development in Portsmouth planned by McAleer & Rushe has been so slow to get off the ground that an extension on the planning permission is being sought. Prelet deals to two hotel operators at the former Zurich building expired. Jurys Inn Group and StayCity had, respectively, been expected to operate a 205-bedroom hotel and a block of 93 serviced apartments.
But some believe the region has potential for hotel developers and operators if the offer is right.
BridgePoint Ventures is providing forward funding to develop Number One Portsmouth for a long-stay apart hotel. Union Hanover Securities is development manager for what will become the first of five Urban Villa hotels in the UK. The £20m tower will have 228 suites.
BridgePoint says the top end of the market has seen occupancy rates in Hampshire and Dorset grow from 75.2% in 2011 to 76.1% in 2012, with room rates up from £55 to £56.70 a night.
BridgePoint chief executive Eric Jafari says although banks remain cautious, there is an opportunity to serve a strong business. “It is hard for people to access the senior debt to develop much apart from a budget hotel,” he says. “Since 2007, the banks and investors have been anti-regional investment stock due to dips in occupancy rates and night rates.
“But the investment community threw the baby out with the bathwater. Southampton and Portsmouth are both extended-stay sectors, where a particular type of hotel can do well.”
Restaurants in demand
The national trend for developments to have more restaurants and cafés has not passed Hampshire and Dorset by. Henderson Global Investors’ Silver Hill scheme in Winchester, which is due to begin construction next year, will include an element of leisure.
Nick Symons, who is marketing the 630,000 sq ft scheme at MMX Retail, says the mix has yet to be decided, but “will be leisure in terms of restaurants”.
Likewise, British Land and Universities Superannuation Scheme’s Whiteley Shopping Centre, between Portsmouth and Southampton, has a proposed £15.5m second phase that includes a nine-screen Cineword. The 60,000 sq ft complex has planning permission from Winchester city council and includes 30,000 sq ft of space for additional restaurants, leisure and community uses.
The mix at Trevor Osborne Property Group’s £50m Nautilus leisure scheme in Bournemouth is more defined. Work is due to start next year on the project, which will include a nine-screen Odeon cinema and 14 restaurants.
Adam Bullas, an associate director with Savills, says enquiries for restaurant space are outstripping supply, with rents likely to hit £35 per sq ft as a result.
No doubt that will hearten Hammerson, which is developing the 950,000 sq ft mixed-use Watermark WestQuay in Southampton (see panel above).
The scheme is expected to provide a huge boost to the city and beyond when it is finished, but in the meantime it is proving something of a double-edged sword, with some operators putting off property decisions until the scheme is further advanced.
Jeremy Braybrooke of Osmond Brookes says: “If you try and push something in the town centre, it will get pushed back by some of the operators and yet it may well be another five years before Watermark is finished. There is pent-up demand for restaurants of the likes of Strada, the slightly more upmarket chains.”
Braybrooke says Southampton rents are down 30-40% as a result.
Nevertheless, overall investment is good and Adam Bullas, an associate director at Savills, says Hampshire and Dorset have followed London as a location that hotel operators want.
“Operators are more rent sensitive than they were,” he says. “They can dictate rents in parts of Southampton and can pay as a little as £15 per sq ft.”
Overall, Bullas expects Southampton, Bournemouth and Portsmouth to attract increasing numbers of leisure operators. He cites the success of Portsmouth’s Gunwharf Quays as evidence of what can be achieved.
Watermark WestQuay
Construction work is finally set to start at Hammerson’s £70m Watermark WestQuay development in Southampton in late 2014, Estates Gazette understands.
Outline planning permission was granted for the mixed-use scheme earlier this year.
Phase one will include a cinema, retail and restaurant units and a public plaza. Talks with a cinema operator are at an advanced stage.
The 950,000 sq ft development is adjacent to Hammerson’s 820,000 sq ft WestQuay Shopping Centre.
Phase two could include a residential tower, a hotel, flexible office space, restaurants and additional public space. Hammerson developed WestQuay Shopping Centre in 2000 and recently launched Dining at WestQuay.
