Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Rooms for improvement


A boom in hotel work is likely to present hoteliers with the problem of ' nding enough capacity in ' rms able to 't them out. Steve Menary looks the prospects in the subsector and ' nds out how one company addressed the problem by acquiring its own 't-out contractor

ARE THE UK's hoteliers so desperate for decent contractors to carry out their expansion and refurbishment work that they need to star t buying them?

That is the unlikely scenario that saved fit-out contractor Speymill from almost certain doom. After being bought by ailing Wigmore Group four years ago, Speymill promptly collapsed into the red until Isle of Man-based investor Jim Mellon stepped in.

Through his investment vehicle, Burnbrae, he spent hundreds of thousands of pounds buying enough shares to gain majority control of Wigmore.

His first task was to off load other parts of Wigmore then recruit Andrew Latham, a former director of a number of hotels and pubs, to run the remaining fit-out business, Speymill.

Mr Mellon's plan is to use £19 million-a-year Speymill to help him expand his hotel empire, which includes the Sleepwell chain that owns hotels with around 600 rooms on the Isle of Man and in Blackpool.

Mr Latham said: 'Sleepwell is expecting to have about 5,000 rooms across the UK and we're their principal contractor. They will not use anyone else for that work.' Speymill will not just focus on Mr Mellon's plans but also plans to work for other hotel chains, where workloads are expected to boom in com ing months.

Private sector retail and leisure activity, including hotel development, rose for 19 consecutive months until stalling in May, according to the PMI commercial development activity index compiled by NTC Research for property consultant Savills.

Mr Latham puts this down to concerns about high street sales hitting shop work and does not expect this to damage prospects in the hotel sector. He said: 'The hotel industry had a bad time after September 11 but that has changed and the number of rooms available is expected to double over the next few years.' The biggest increase is expected in London, where the number of hotel rooms being built is expected to surge from 1,571 this year to 2,956 in 2006, according to consultant PKF.

The data was compiled for the Hotel Britain 2005 report, and PKF expects provision of new rooms to fall off to 826 in 2007 then surge again the following year, when 2,659 rooms are expected to be built.

Stephen Lang, Savills' commercial research director, said: 'For average rental growth, 2001 and 2002 were dire for the hotel sector.

'In London alone returns were ?20 per cent, and ?15 per cent in the rest of the UK. They have recovered since then and were positive last year but, if you look at overall returns, hotels have outstripped offices, retail and industrial over the past 10 years and averaged 13 per cent a year.

'People are paying good money to stay in hotels, there are also a lot of niche products emerging and that's why all these new rooms are being built.' Mr Lang's bullish viewpoint is backed up in an exclusive study for Construction News by data from construct ion informat ion specialist Emap Glenigan.

This research shows 101 orders placed worth £100,000 or more for work on hotels in the 12 months to May 2005 that totalled £654.1 million (see table 1).

Overall spending on hotel work was £17 million down on the previous year but fewer contracts ? 92 ? were let then and a sizeable amount of hotel work is also in the pipeline.

Emap Glenigan's study shows £690.5 million of hotel work approved by the UK planning authorities but not let in the same period (see table , below right).

Building a new hotel is not dissimilar to an office block ? a steel frame, blocks and bricks ? but the reason hoteliers could face problems opening new rooms is that part of the increase in their number is expected to come from refurbishment and extension work.

That is why Mr Mellon would prefer to buy a contractor to do his work, because in there are only a limited number of firms able to do this work.

Chorus, Curzon and Beck are the big firms in this subsector, all turning over in excess of £50 million, while south-east based Rampart and EE Smith are smaller firms that also do hotel work.

Belfast-based Mivan often tenders for hotel jobs but there are few other big firms working in this area.

Curzon chief executive David Freeborn said: 'In the past two years there has not been enough hotel work to build a business around because it's cyclical.

'Now all the reports say the revenue per room is going up and the percentages of rooms occupied is also going up. You would think hotels would do refurbishment work when the rooms are empty but it doesn't work like that. Major hotels redecorate every three to five years and then do big internal jobs such as retiling between every seven and 10 years.

'We are nearing the period in the cycle where the big jobs are coming up and there's a lot of opportunity.

'A million pounds does not get you very far redecorating a five-star hotel so these jobs are big and I wonder how the industry will cope.' Some of the major hotel chains have already set out on major expansion work with the Intercontinental and the Grosvenor in central London both being upgraded.

With obvious signs that a glut of work is likely to emerge, one or two contractors are looking to try and break into this subsector.

The slump in work in the early part of this decade was not restricted to hotels, and a number of office fitout contractors also went under, such as Spectrum and Bellwater. Some of their staff have dispersed to groups looking to break into office fit-out but to also use the sk ills f rom this area to work on hotel projects.

Mace recruited former Bellwater director Steve Root to handle all fit-out work at Como, a new business set up to work as a contractor on jobs ranging from £100,000 to £10 million including hotel projects.

Steve Booth, director responsible for Mace's residential and retail contracting, said: 'The best training ground to do hotel work is the residential sector. If you're building 150 apartments or refurbishing a 1,000 room hotel there's a lot of similarities. It's about having the right skillset.' Mr Freeborn agrees, citing Curzon's work refurbishing 750 rooms at the Forum Holiday Inn in Kensington, west London as an example.

He said: 'You tend to get the rooms in tranches of 30 on a rolling basis but the rest of the hotel is occupied so you can't work at night or do any drilling then.

'It's good because you're on a learning curve and you pick up as you go along. The next 300 to 400 rooms are just repetitive and it's not very exciting but I like that because that means there are not any problems for us or the clients.' For the contractors, the only problem looks likely to be cherrypicking the hotel work coming up for grabs.

But for the clients, getting that work done could be the real dilemma.

Whether hotel clients are desperate enough to follow Mr Mellon's example and buy a contractor to ensure they get what they want done remains to be seen.