The hotel sector is set for £800 million-worth of investment as Whitbread expands its Premier Inn stock by 50 per cent.
The UK’s largest hotel and restaurant group is planning to increase its number of rooms from 43,000 to at least 65,000 by 2015/16.
Building hotels with low-carbon technologies and sustainable materials will be at the core of the strategy, with the size of projects varying from under £1m up to the £17m hotel above Westfield shopping centre.
Whitbread head of construction Alex Flach told CN that with each room costing about £40,000, total construction value could be as much as £800m.
The company has already invested £250m this year, and there is a committed pipeline of 10,500 Premier Inn UK rooms, including 4,000 scheduled to be built in 2011/12.
The news follows a strong Q2 2011 for Whitbread, when like-for-like revenue per available room grew by 11.4 per cent in London and by 2.9 per cent elsewhere.
Its preferred contractor list has grown each year, and now includes Kier, Ardmore, Broadoak Construction, Carter Lauren, John Wilkinson Builders, McAleer and Rushe, Multibuild, Ogilvie Construction, Orientrose Contracts, RG Carter Construction, Sisk, Speymill and Watkins Jones.
But Mr Flach told CN there were still opportunities to tender for work. Contractors are selected after a face-to-face interview. “It has to be a meeting of minds - it’s a cultural thing.
“If you are a contractual company who has got a bunch of lawyers, you are probably not the right contractor for us.”
Whitbread will also build 80-100 new restaurants on hotel sites over five years.
Some of the hotels will be tendered directly by Whitbread from existing operating cashflow and finance facilities, while others will be contracted out by developers, where Whitbread is the lease owner.
The firm has just completed a recent £53.8m sale and lease back of seven sites with Lasalle Investment Management.
Having developers leading on certain schemes, when Whitbread is not the direct client, offers a “great way to learn about contractors” and their willingness and ability to be flexible and handle an evolving sector, Mr Flach said.
“How they perform with us when we are not their client is very interesting,” he added.
Whitbread checks the strength of balance sheets and average payment terms for suppliers during the selection process.
Contractors must be flexible because the work ranges from new-build to complex conversions.
Mr Flach drew on the example of a recent project in Leicester Square, where the contractor had to build room pods offsite and deal with acoustic problems during the office conversion.
“We got Broadoak in very early and they built two or three model rooms with different structures to work out the cheapest, fastest and best performing. Without the early involvement, the project would not have got off the ground.”