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Hotel construction

News last week that the Travelodge chain of hotels has approached 124 councils with a proposition aimed at securing low-interest loans to buy land has highlighted the increasingly pioneering tactics companies are using to beat the economic downturn.

The effects of the financial crisis have been felt by all areas of the construction industry and the hotel and leisure sector is no exception.

The UK’s sluggish economy and slow recovery has halted the growth of small hotel brands and forced larger firms who have failed to secure finance to start thinking more laterally.

The move by Travelodge in asking councils to partner with them to gain access to cheap finance through the Public Works Loan Board (PWLB), the public sector lending arm of the Treasury, is one such example of this new lateral thinking.

The hotel chain has already completed two projects with local authorities in the Hampshire borough of Eastleigh and Aylesbury, in Buckinghamshire, using the PWLB to access funding to redevelop surplus council-owned land.

Clare Murgatroyd, Glenigan’s hotel and leisure sector expert, says these public-private partnerships could be used to benefit both parties – as long the appetite for budget hotels continues.

“Travelodge have presented councils with a great opportunity to maximise income-producing land in their regions, create more jobs and produce annual revenue through leasing the land to the hotel and other occupiers involved,” she said.

“The idea for partnership is great, but is this the kind of development wanted by councils?”

Travelodge has reported that five councils have already responded to their interest and the company expects more by the end of the year.

With industry commentators submitting cautiously optimistic forecasts for construction growth next year, increased confidence within councils should lead to a greater focus on redevelopment.

Glenigan data suggests Manchester, Birmingham, Glasgow and Edinburgh all have a strong pipeline for growth in hotel space, with Glasgow’s growth driven largely by the 2014 Commonwealth Games and the other regions becoming more desirable to visit.

Clare said: “Within these regions and other UK locations, I predict an increase in refurbishments and fit-outs to existing hotels. “

She added: “The rise in budget hotels has impacted the market substantially; luxury hotels have had to step up their game and independent hotels are left fighting for a slice of marketplace.

“The likes of Travelodge and Premier Inn have raised the standard so much that the marketplace need not stay elsewhere.”

This trend has not gone unnoticed by a number of international hotel chains which are set to open in the UK over the coming years.

Motel One, a German hotel firm currently just located in Edinburgh, is set to expand its UK stock and Marriott are reportedly bringing its low-cost Moxy brand to Britain next year.

Clare said: “As the UK’s budget hotel market continues to boom, with Premier Inn wanting 23,000 more rooms by 2018, it seems every provider will be vying for space during 2014 and beyond.”

For more information about the hotel and leisure sector, contact Clare Murgatroyd on 0800 373 771 or email clare.murgatroyd@glenigan-old.thrv.uk

Do you think other sector developments could benefit from utilising funds from Public Works Loan Board? Get in touch with your thoughts via our social media channels.

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