Capital ideas

Once, Leith was little more than an industrial wasteland a mile-and-a-half east of Edinburgh's city centre. However, over the past few years, major Leith landowner Forth Ports has pushed the area further towards its vision of a Docklands for the Scots capital.

Like London's Canary Wharf, the area has encountered what some term a "few false starts". Nevertheless, numerous pubs and restaurants, many residential units and some commercial developments have emerged, including three out of five of the Scottish Office's departmental buildings.

Now the area's biggest development yet is soon to join one of the most historic. The former Royal Yacht Britannia is already berthed in the docks and opened to the public as a tourist attraction in October. By 2001, Britannia will be relocated alongside Ocean Terminal, a massive 450,000sq ft, £50m retail and leisure complex being developed by Forth Ports. Designs for the scheme have been drawn up by Sir Terence Conran, and the finished development will be visited not only by locals and tourists but by the numerous world-cruise liners that already regularly tie up to the docks.

At the moment, the main visitors' hotel in the Leith area is the mid-range Malmaison, which recently expanded to include 60 bedrooms. However, a three-star, 102-bedroom Holiday Inn Express is now being built by Saltire Leisure at Britannia Way and is due to open in March. It will include two meeting rooms, a restaurant and bar. Julia Christiansen of Saltire says that its 80 parking spaces will be a pull: "You can spend £120 in the city centre for accommodation and still not get a parking space. We are offering pre-opening packages from £39.50."

But Holiday Inn will see competition from a 60-bed Whitbread Travel Inn, also now being built, at nearby Newhaven Harbour, and due to launch at a similar time next year.

And Callum Ford of Forth Ports says that planning consent has been given for a 120-bedroom hotel at Ocean Terminal, although there are no concrete plans as yet. He envisages a four- or five-star affair, in contrast to the midmarket competition in the area.

Leith is just one area of growth around Edinburgh, and there is little doubt that now is an exciting time for the city. An ancient centre for learning and the arts that revels in the centuries-old nickname of "the Athens of the north", the old capital is being revitalised, especially with the opening of the reinstated Scottish Parliament.

Those hoping to benefit from political visitors include Bathgate-based Macdonald Hotels, which plans to develop an £11.5m, four-star, 146-bedroom hotel close to the site of the new parliament. It will also sit near the new headquarters of The Scotsman newspaper, and close to the Dynamic Earth tourist attraction - a multi-million-pound tourist draw that will tell the story of how the world was formed. Donald Macdonald, chief executive of Macdonald Hotels, says that he hopes the hotel will benefit from its convenient proximity to its political neighbour as well as the nearby open spaces of Queen's Park.

In the city centre, perhaps the most exciting piece of news has been that Leeds hotelier Jonathan Wix, of 42 The Calls, is to develop a luxurious £15.5m hotel in The Scotsman's current, imposing building. After the journalists depart next year, the building will be reworked into a 68-bedroom hotel with 10,000sq ft of restaurants and bar - reported to be under offer to a new branch of London gastrodome Bank - plus a 30,000sq ft health club.

More upmarket

Wix believes that Edinburgh is one of only a handful of cities in Britain that could support such a luxury brand hotel and achieve the kinds of room rates needed to keep it going. "It will be entirely more personal than a standard city-centre five-star," he says, "a hybrid between a five-star and a townhouse hotel. It's not going to be totally designed in the Hempel-type approach, but it will be a little bit more upmarket than 42 The Calls."

However, Wix recently saw his main competition, luxury hotel group Cliveden, pull out from plans to build a £14m, five-star, 64-bedroom hotel at the former Scottish Equitable building in St Andrews Square. Cliveden announced that the property was too small for its ambitions and it has now been acquired by Destination Europe.

Wix says he is almost disappointed. "I was quite happy to see Cliveden in there," he says. "We could complement each other, as we have very different products at the top end of the market." However, Richard Oldworth, spokesman for Cliveden, says it is still "very much" looking at Edinburgh.

There are certainly other buildings in the city centre with potential for major hotel conversions. One such is the 145,000sq ft GPO building, another well-known city-centre landmark. At least two five-star hotel operators are believed to be considering it. Stewart Taylor of CB Hillier Parker, property agent for owner Raglan Estates, is seeking offers in the region of £10m. However, he says that as office rents have risen in recent months the building is also being examined for competing uses. "There will be quite high development costs," he says, "so to justify any hotel it would need to be a four- or five-star."

And Alan Creevy of Chesterton believes that the high cost of office rents could now price many hoteliers out of the market for conversions. "The value of offices has taken a big jump," he says. "Hoteliers will really have to work hard to get occupancy rates to justify it. But Edinburgh is already rumoured to be at 80% occupancies. It's difficult to get better than that in the city centre."

Nevertheless, 1998 has already seen several additions to Edinburgh's hotel market. Chris Dougray at leisure property specialist Donaldson advised Jurys on the acquisition of its mid-range, three-star, 186-bedroom Edinburgh Inn, which opened at the start of July on Jeffrey Street, close to Waverley Station. His assessment of the whole situation is: "Demand in Edinburgh is going crazy at the moment."