City Inn seeks capital gains

City Inn is to open the largest new-build hotel in London for 30 years in June. The 460-bedroom hotel and 200-seat restaurant in Westminster is City Inn's fourth opening since the company's inception in 1995. It opened its first hotel, in Bristol, in 1999.

The Westminster property, currently under construction, represents an investment of about £50m and is aimed at the under-represented four-star market with a projected rack rate of £215. It will compete with Marriott's five-star County Hall over the river.

Managing director David Orr said he was confident the new hotel would compete with both four- and five-star hotels in the area. "We've already built up strong relationships with blue-chip customers in Birmingham, Bristol and Glasgow," he said. "We have a very loyal customer base." Orr predicts occupancy of around 60% in the first year.

Despite the impenetrability of London for expanding hotel groups, Orr said the capital was always on the agenda. "We knew from the beginning that to have a serious UK brand our strategy had to include a London hotel."

City Inn was developed in Scotland by father and son Sandy and David Orr and Donald MacDonald (no relation to Donald Macdonald of Macdonald Hotels). It is a joint shareholder venture with HBOS (Halifax Bank of Scotland). Sandy Orr and MacDonald are also co-directors of corporate finance company MacDonald Orr.

The company's conception in 1995 was followed by three years of research to create the founding principles of the City Inn brand. A set of requirements was devised for each hotel, including new-build, city-centre location and café-restaurant to incorporate a south- or west-facing terrace for outside dining. The café is operated separately from the hotel to produce a high-quality dining operation.

Orr admits the requirements are explicit but says the time and effort it takes to achieve them are worthwhile. Company turnover for the year ending March 2001 was £5m, with gross operating profit of £1.5m. By 2002 turnover had leapt to £10m and gross operating profit to £3.5m. End-of-year results for March this year are expected to reveal a turnover of £12m and gross operating profit of £4.5m.

According to Orr, a new-build is vital to this success because it allows City Inn to guarantee customer expectations in terms of technology, comfort and security. "With a new building you can provide all the aspects of service you want," he says. Having complete control from sourcing the land to designing and building the hotel and restaurant are seen as vital to the brand. Details such as windows that open, maximising natural light, and "fresh air" air conditioning are built in as a matter of course.

At the new Westminster property the top two floors, comprised only of suites, will benefit from entirely glass exterior walls. On the very top of the building a two-storey glass atrium or "sky lounge" is being added to provide a reception space for private dining and executive breakfasts.

Rooms are not the only foundation of the City Inn brand. About 25% of turnover is expected to come from the brand's trademark restaurant, City Café. Orr said the restaurants were a vital part of the business and, in Westminster, faced little competition at present.

A head chef has yet to be appointed, but Orr said City Cafés aimed to be destination restaurants and outshine local competition. Martin Walker, head chef at the Birmingham City Café, was formerly at London's original Bank restaurant, and Richard Lyth, head chef at the Glasgow Café, recently won the Auchentoshan award for best new restaurant, voted for by the Restaurant Association.

Plans for the group include a new hotel in Manchester and further properties in Leeds and London. "In five years I'd like to have eight to 10 hotels operating under the City Inn brand," said Orr. "That could include properties in Europe and the USA."

City Inn

3rd floor, Millbank Tower, 21-24 Millbank, London SW1P 4QP
Web site: www.cityinn.com

Executive chairman: Sandy Orr
Managing director: David Orr
Finance director: Huw O'Connor
Hotels: John Islip Street, London, Brindley Place, Birmingham, Temple Way, Bristol, Finnieston Quay, Glasgow

London's new build hotels*

*\ with 450-plus rooms

Source: TRI Hospitality Consulting research