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Royal Borough of Kingston upon Thames Hotel market opportunity

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					Royal Borough of Kingston upon
                       Thames

       Hotel market opportunity
  assessment for Kingston town
                        centre




                       April 2007
                 This document is prepared solely for the use
                  and benefit of Royal Borough of Kingston
                 upon Thames. Neither the authors nor PKF
                accept or assume any responsibility or duty of
                           care to any third party.




Farringdon Place 20 Farringdon Road London EC1M 3AP
Tel 020 7065 0000 Fax 020 7065 0650 www.pkf.co.uk
 Royal Borough of Kingston upon Thames


Contents

1      Introduction................................................................................................. 1
2      Executive Summary.................................................................................... 4

3      Overview of Kingston.................................................................................. 7
4      Hotel Supply in London and the Kingston Area ........................................ 22

5      Demand for Hotel Accommodation in Southwest London ........................ 36
6      Site Analysis of Vicarage Road & Bishop’s Palace .................................. 44

7      Former Power Station & EDF site planning application review................. 51
8      Commercial Viability ................................................................................. 58
Appendix A - Kingston’s Areas for Change ...................................................... 60
Appendix B - Kingston’s Road Network ............................................................ 61

Appendix C - NHP’s PS1 and EDF Site Plans.................................................. 62
Appendix D - Contacts...................................................................................... 69

Appendix E - Definition of Hotel Classification.................................................. 70
Appendix F- Corporate Demand Questionnaire................................................ 71

Appendix G - Hotels in Northeast Surrey.......................................................... 73
Appendix H - Grading Matrix ............................................................................ 74

Appendix I - Grading Matrix Scores.................................................................. 77
Royal Borough of Kingston upon Thames



1        Introduction
         Background to the assignment

1.1      The Royal Borough of Kingston upon Thames (Royal Kingston) has a long unfulfilled
         aspiration of securing the provision of a quality full-service hotel in Kingston town centre. The
         former Power Station Site (PS1) in the Council’s Unitary Development Plan (UDP) includes a
         hotel an appropriate use.

1.2      The Council has now identified a further three potential sites within the town centre for the
         potential development of a hotel and now requires PKF to provide an options appraisal of
         each of the four sites. The sites are as follows:

             1.   PS1;

             2.   EDF Sub-station, also part of PS1;

             3.   Vicarage Road/Wood Street site; and

             4.   Bishop’s Palace House.




         K+20

1.3      K+20 is the longer term strategy for Kingston town centre, which was initiated in 2002 and is
         being taken forward as an Area Action Plan for Kingston Town Centre, under the new
         planning system introduced in 2004. The Council identified the following issues:



April 2007                                                                              Introduction 1
Royal Borough of Kingston upon Thames


             the loss of daytime visitors, especially shoppers and the effect on the centre’s vitality;

             the vibrant night-time economy attracting increasing numbers of young people and
             resulting in some disorder;

             the quality of the streetscape;

             parking difficulties and congestion at peak times; and

             a shortage of vacant sites and a lack of land for the town centre to expand.

1.4      K+20 is a spatial plan to address the above over the next 15 years. A quality hotel with
         conference and banqueting facilities is identified as one of the requirements to improve the
         leisure offering in Kingston.

         Terms of reference

1.5      PKF has therefore been retained by The Council to undertake a review of the local hotel
         market and conduct an appraisal of four potential hotel sites.

1.6      The following terms of reference were agreed:

             Assessment of the current market conditions for hotel development in general, how this
             relates to Kingston, and the prospects for Kingston as a hotel destination, now and in
             the future;

             The commercial viability of a hotel at the four identified sites: the PS1 site and adjoining
             EDF sub-station; Vicarage Road/Wood Street/Northern riverfront; and Bishop’s Palace
             House;

             An options appraisal of the feasibility of securing a ‘quality hotel’ - ie a full-service hotel
             with restaurant, banqueting, conference and meeting facilities, on one of those sites;
             and

             A commercial evaluation of the recent application for a proposed mixed-use
             development on the PS1 and EDF sites, and the suitability of the Skerne Road/Down
             Hall Road corner for a quality hotel.

         Study methodology

1.7      Within the terms of reference of this assignment and in accordance with our proposal dated
         11 July 2006, we conducted field research in the market area which comprised the following:

             visiting the proposed sites to assess their suitability from the aspects of location,
             visibility and accessibility, and proximity to demand generators;




April 2007                                                                                Introduction 2
Royal Borough of Kingston upon Thames


             identifying and evaluating the existing supply of hotels, as well as any planned new
             hotels or extensions to existing hotels, which would be potentially competitive;

             inspecting the facilities and interviewing the management of a number of competitive
             properties within the market area;

             interrogation of our database to evaluate performance trends of hotels in the market
             area;

             conducting background research into the general economic conditions prevailing in the
             market area;

             interviewing national and international hotel operators; and

             interviewing representatives from the local tourist board, district council and local
             companies.




April 2007                                                                             Introduction 3
Royal Borough of Kingston upon Thames



2        Executive Summary
         Introduction

2.1      In this section we provide our executive summary of the report. We have extracted our key
         findings from each of the sections in the report.


         Overview of Kingston

2.2      Kingston enjoys a range of complementary attributes that has led to it becoming one of the
         leading retail destinations in the country. The economic base of the town centre is firmly
         founded in the retail sector, the town has a strategic location vis à vis London and the south
         coast via the A3 and the rest of the country via the M25, has good train connections to
         London and it is at the heart of one of the most affluent areas of the country. Kingston is
         located on the River Thames and is a highly desirable residential area, given its proximity
         and links to London. The only area where the town lacks competitive advantage is from the
         office market perspective.

2.3      From the tourism standpoint Kingston has much to offer. The breadth and quality of the retail
         facilities in the town centre together with being in easy reach of a wide variety of cultural and
         recreational visitor attractions, give Kingston a significant edge over many other London
         boroughs. The latter, however, may benefit by enjoying a closer location to central London,
         but with its transport links Kingston is not over-disadvantaged in this regard.

2.4      Taking the above factors into account it is our view that Kingston has the necessary
         characteristics to support quality hotel development given its location and its economic and
         tourism attributes.


         Hotel Supply in London and the Kingston Area

2.5      Hotel supply in London is concentrated north of the River Thames in the West End
         (Westminster, Camden and Kensington and Chelsea) and there are further concentrations in
         Hillingdon, servicing Heathrow Airport and the Docklands/Canary Wharf areas, servicing the
         large amount of new office developments that have taken place. Outer London Boroughs
         have a much smaller supply of hotel accommodation, which includes Kingston. Kingston’s
         own supply of accommodation is dominated by budget and three-star hotels and it lacks any
         four or five-star properties. Nevertheless, as demonstrated, Kingston has a good economic
         base and a strategic location, both of which are positive factors as far as hotel development
         is concerned.

2.6      Given its size, strategic location and level of visitation that Kingston receives, we believe that
         the town is considerably undersupplied as far as hotel provision is concerned and lacks any



April 2007                                                                       Executive Summary 4
Royal Borough of Kingston upon Thames


         quality hotel accommodation within walking distance of the town centre. The only supply in
         the town centre is the Travelodge, the remaining supply is either independently owned and
         operated hotels or provincial three and four-star hotels located on the town’s periphery. The
         nearest quality hotel (with four-star grading) is not located within Kingston at all, but in
         Richmond.

2.7      Due to the level of hotel supply compared to the strength of Kingston as a commercial
         destination we believe that Kingston requires additional quality hotel supply to compete with
         the standards of accommodation being made available by its London peers, eg Wimbledon
         (three hotels with 141 bedrooms in total), Sutton (one hotel with 116 bedrooms) and Croydon
         (eight hotels with 803 bedrooms), all of which have at least one quality hotel in their
         respective centres.


         Demand for Hotel Accommodation in Southwest London

2.8      The performance of hotels in the southwest London/Kingston area was buoyant in 2006 and
         despite the worldwide geopolitical events since 11 September 2001, the performance has
         been remarkably consistent. This underlines the fundamental strengths of the area in terms
         of its economy and attraction as a destination. In Kingston’s case the town can appeal to all
         market segments, from corporate to conference, leisure break to VFR (Visiting Friends and
         Relatives), all of which would help to support the development of a quality hotel within the
         town.

2.9      We have modelled various scenarios for the room count of any proposed hotel, from 50
         rooms to 200+ rooms, and based on projected monthly performance, historic demand and
         taking into account certain site restrictions and market characteristics, we believe 150 to 200
         rooms is the optimum room count.


         Analysis of the potential hotel development sites

2.10     While the results of the grading matrix analysis indicate that a hotel development on the
         Vicarage Road site would be the preferred option, it is our view that the proposed hotel on
         the EDF site should be encouraged. It is a real proposal and would provide Kingston with a
         quality hotel with 150 bedrooms, dedicated car parking and good conference and banqueting
         facilities.

                                               2
2.11     The key issue is that we believe 22m bedrooms, which are also very long and narrow, does
         not conform to current operators’ brand standards for quality hotels and would act as a
         disincentive. Operators advised us that they were reluctant to wrap their hotel around the
         sub station and that the resulting long corridors and unconventional floor plans were also not
         conducive to their typical builds.




April 2007                                                                    Executive Summary 5
Royal Borough of Kingston upon Thames


2.12     Although the EDF site is slightly less favourable than Vicarage Road, the hotel will occupy a
         prominent position in a redeveloped location which should transform the area’s current
         somewhat unattractive appearance, dominated as it is by the sub-station.


         Commercial viability

2.13     For the purposes of demonstrating the potential commercial viability we have made the
         following assumptions:

             A quality hotel with 150 rooms supported by an all-day food and beverage outlet and
             meeting and function facilities;

             The hotel is operated by a major international hotel chain;

2.14     In a stabilised year and in current values the hotel achieves an average annual room
         occupancy of 75% in line with the recent market performance, at an average room rate
         (ARR) of £85.00 net of VAT

2.15     In our experience hotel properties in the UK (not trophy or central London hotels) have in the
         recent past been changing hands at earnings multiples in the order of 10 to 15 times
         EBITDA (earnings before interest, tax, depreciation and amortisation). In our example the
         hypothetical EBITDA achieved by the hotel is £1.9m. Applying an earnings multiple on 12
         (on a prudently conservative basis) results in a notional value of £22.6m, or £150,000
         (roundly) per room. Per research published by Knight Frank in 2005, the estimated cost of
         building a mid-market hotel (including fees and fixtures, fittings and equipment – FF&E), is in
         the order of £114,000 per room (excluding land). Conversations we have had with operators
         during the course of the assignment indicated building costs on the same basis for a four-
         star hotel at approximately £135,000 per room.

2.16     In this example it would seem therefore, that the earnings produced by the hotel would cover
         the development costs of the property and therefore encourage a developer to proceed with
         the project.




April 2007                                                                    Executive Summary 6
Royal Borough of Kingston upon Thames



3        Overview of Kingston
         Introduction

3.1      Royal Kingston enjoys a long and colourful past from its origins in Angle-Saxon times, being
                                                                                    th
         first recorded in an Anglo-Saxon charter in 838 to become by the 10 century the seat of
         coronation for Anglo-Saxon kings, to its position today as one of the most popular retail
         centres in the country. It is one of only four Royal boroughs in England and Wales and one
         of only two within London.

3.2      Kingston is in a privileged position being set on the banks of the River Thames and is a short
         distance form Henry VIII’s Royal Palace at Hampton Court as well as other famous
         sporting/cultural visitor attractions such as Sandown Park, Twickenham, Kew Gardens and
         Chessington World of Adventures. It is also a university town with a large student population
         which together with Kingston College represents over 30,000 students. Apart from the town’s
         retail attractions represented by famous names such as John Lewis, Bentalls, Marks and
         Spencer and a wealth of well known high street brands, Kingston offers a rich diversity of
         food and drink outlets making it a popular and lively evening and weekend destination.

3.3      Royal Kingston was previously under Surrey County Council’s authority, but is now within
         Greater London, and this reflects its somewhat ‘betwixt and between’ location. While a
         London borough, its location at the extreme southwest of London and penetrating into
         Surrey, means that many of its visitors, whether commercial, leisure or day visitors, are
         drawn from within Surrey as opposed to London. Kingston is at the heart of very popular
         ‘commuter-land’ as it is surrounded by three key residential areas in Surrey – Elmbridge,
         Mole Valley and Epsom and Ewell. Commercial visitors to Kingston (and its hotels) are likely
         to have business in the town itself or in the surrounding areas and leisure visitors could
         certainly use Kingston as a base to explore the town and the attractions in the vicinity. Its rail
         links to central London, from its own station and from Surbiton, a short distance from the
         town, also mean that visitors can visit the capital, although as we discuss later, Kingston
         finds it difficult to compete with hotels more centrally located in London for reasons of
         immediacy of access and proximity to the capital’s key commercial and leisure destinations.

3.4      In the following section we analyse the economic, commercial and infrastructural
         environment and relate it to its ability to generate hotel demand.


         Location

3.5      Royal Kingston enjoys a strategic location in a key area of the country, being both part of
         London and in close proximity to some of the country’s most important residential,
         commercial and communication areas, namely in the latter regard, the M25, London



April 2007                                                                     Overview of Kingston 7
Royal Borough of Kingston upon Thames


         Heathrow and Gatwick Airports. The M25 is the country’s most important hub as it provides
         access to the key motorway networks as well as routes into London itself and its various
         boroughs. Per the Office of National Statistics, Inner and Outer London provide 20% of the
         UK’s Gross Value Added (GVA) and their importance to the country is paramount.

3.6      To illustrate Kingston’s strategic location we show its position within London in Figure 3.1.

                               Figure 3.1 - Map of London Boroughs




3.7      Therefore taking into account the above points we therefore feel it appropriate to limit our
         competitive analysis within this report to the neighbouring London Boroughs of Richmond,
         Wandsworth, Merton, Sutton and Croydon. In addition, due to the Borough of Kingston being
         inextricably linked with northeast Surrey geographically, we make reference to relevant
         factors within the adjacent Surrey Boroughs, eg Elmbridge, Mole Valley and Epsom & Ewell.


         Economy

3.8      Royal Kingston has a resident population of approximately 153,000 of which 67.5% are of
         working age (Nomis 2006). The percentage of the economically active population that were
         job seekers allowance (JSA) claimants was 1.4% as at August 2006. This compares with
         3.4% in London and 2.6% for the UK as a whole. Economically, therefore, measured in



April 2007                                                                    Overview of Kingston 8
Royal Borough of Kingston upon Thames


         terms of unemployment, Kingston is below the UK average, reflecting the strength of the
         local economy and this is supported the relative affluence of Kingston residents and those in
         the surrounding areas.

3.9      The breakdown of employment by sector (see Figure 3.2) illustrates the high level of
         employees in the service industry, with over 92% currently employed in this sector. This is
         unsurprising given that Royal Kingston is a strongly residential area with little space available
         for large manufacturing businesses and also given its position as the premier retail
         destination in the area. Distribution is also an important sector with easy access to the M25
         and central London via the A3 providing a natural draw.

        Figure 3.2 - Employment in Kingston by sector (Source: ONS)

                                                      5%        3%
                                              5%
                                    7%                                                          31%




                              22%

                                                                               27%

                               Distribution, hotels & restaurants       Public admin, education & health

                               Finance, IT, other business activities   Other services

                               Manufacturing                            Transport & communications

                               Construction




3.10     In Figure 3.3 it can be seen that the majority of companies in Royal Kingston are relatively
         small with roughly three-quarters of businesses having 500 employees or less. This is
         consistent with the observation above that there is limited space available in Royal Kingston
         for large businesses and thus inevitably companies in the area will have a limited number of
         employees.

        Figure 3.3 - Employment by size of company in the Borough of Kingston (Source: ONS)

                Employment      Number of           Percentage             Numbers of          Percentage
                                businesses                                 employees
                1,000+                 1                 0.1%                1,084                5.7%
                500-999                5                 0.6%                4,208              22.0%
                100-499              26                  3.5%                3,961              20.8%
                50-99                43                  5.8%                2,660              14.0%
                10-49               311                41.9%                 5,362              28.1%
                1-9                 355                47.9%                 1,792                9.4%
                Total               741               100.0%                19,067             100.0%




April 2007                                                                                        Overview of Kingston 9
Royal Borough of Kingston upon Thames


3.11     Apart from the famous retail stores in Royal Kingston, the Borough has attracted a number
         high-tech companies, such as AMS (Alenia Marconi Systems), DST International, ICX
         Global, Northamber and Northrop Grumman Sperry Marine. Lever Fabergé and TUI are
         other key companies in the area and all of these companies have strong international links
         and are therefore likely to be significant generators of international visitation to the area
         which in turn will result in demand for hotel accommodation.

3.12     From an economic perspective Royal Kingston is certainly above average in comparison
         with the UK in general. This reflects its strategic advantage in terms of its location and the
         quality of the businesses in the area. This situation is unlikely to change in the short to
         medium term, assuming that the UK economy continues to grow as it has been and
         therefore the economic prospects for Royal Kingston are positive.


         Office Space

3.13     Figure 3.4 below illustrates the locations of the main business and industrial parks in Royal
         Kingston. The larger business parks (Barwell and Silverglade) are located in the south of the
         borough, due to there being more space available, whereas those closer to Kingston Town
         Centre tend to be more compact sites. Figure 3.4 also illustrates the importance of the A3
         and M25 connections which link Kingston to central London and the south coast via the A3
         and the rest of the country via the M25.

Figure 3.4 - Map of the Borough of Kingston identifying its industrial and business parks




April 2007                                                                Overview of Kingston 10
Royal Borough of Kingston upon Thames


3.14     Per the Kingston Town Centre Action Plan Background Paper 7 – Office Survey 2005 the
         supply of office accommodation in Kingston is concentrated in 37 key office buildings plus
         small office suites above shops. The combined area of the 37 key buildings is just over
                              2
         873,000ft . There is no grade A office space; Grade B+ offices comprise 30% of the total
                                              2
         with nearly 260,000ft in eight buildings; Grade B- offices account for 67% of floor space
                               2                                                                        2
         (567,000ft in 25 buildings) and four Grade C office buildings with 26,000ft represent the
         balance of 3%. It is fair to say that the take-up of office space in Kingston has declined over
         the past nine years as illustrated in Figure 3.5.

Figure 3.5 - Take-up of Kingston’s office supply, 1998 to 2006


                            180,000

                            160,000

                            140,000
                            120,000
              Square feet




                            100,000

                             80,000

                             60,000

                             40,000

                             20,000

                                   0
                                       1998       1999   2000   2001   2002   2003   2004    2005   2006 to
                                                                                                     date

             Source: Cattaneo Commercial



3.15     The abovementioned Survey states that ‘with no new office accommodation and little good
         quality refurbished space, the town centre’s function as an office and business centre has
         declined relative to nearby centres, especially those in Surrey.’ The key issue is that it is
         difficult for Kingston Town Centre to attract new office development or refurbishment of
         existing offices as office rents compare unfavourably with retail or residential rents. Per the
         survey, office rents range from £10 to £23.33 per square foot and the average is £17 per
         square foot. By contrast, retail rents can be in excess of £250 per square foot (see Figure
         3.6). The magnitude of the differential is significant; however, in our view Kingston is an
         attractive location for office development given its river frontage and town centre character,
         strategic access advantages and a high skills base in the immediate area.

3.16     One possibility for the regeneration of office demand in Kingston would be the development
         of an ‘Innovation Centre’ which would provide start-up businesses with relatively small areas
         of space at affordable rents. As the start-up businesses grow so do their space requirements
         and on the basis they had established themselves in Kingston and recruited from the area,
         they would be inclined to stay locally and therefore seek new premises in the vicinity. The



April 2007                                                                                  Overview of Kingston 11
Royal Borough of Kingston upon Thames


         type of businesses that might be attracted to such an Innovation Centre could those in
         knowledge based business services, and information and creative industries sectors.

3.17     Following a series of telephone questionnaires with local companies (see Appendix D for
         companies interviewed), there is a perception that Kingston Town Centre has limited off-
         street parking and a poor road network. However we believe that this perception is over-
         general and it is more the case that some car parks are particularly popular during peak
         periods, because of their strategic location, and therefore the associated roads are more
         prone to congestion. It is true that at weekends and when major events are taking place such
         as the run-up to Christmas and the Hampton Court Flower Show, the car parks in the centre
         of the town fill quickly and roads leading to Kingston become congested. Outside those
         occasions, however, access to and within Kingston is no more difficult than any other busy
         town centre.

3.18     The provision of a quality hotel in Kingston Town Centre could also be a catalyst for quality
         office development. Companies would be attracted by the hotel as a convenient location to
         accommodate visitors and provide meeting, training or function space.

         Retail
                                                        th
3.19     Kingston was previously reported to be the 6 most popular retail centre based on enquiries
         for floorspace. According to PROMIS Kingston received 128 enquiries in 2006 compared to
         the UK average of 49. Kingston attracts some 18m visitors per annum, however according to
                                                                        th
         CBRE’s shopping ranking index, Kingston is now ranked 14 in the UK which means that its
         popularity has slipped in recent years. According to a survey undertaken by Hillier Parker,
         Kingston’s retail catchment area penetrates as far north as Hounslow, east to Wandsworth
         south to Leatherhead and west to Staines. The Council is seeking to enhance the retail
                                                                                  2
         offering in Kingston by growing the available floorspace by 50,000m , primarily through the
         Eden Quarter redevelopment.

3.20     Retail rents in Kingston are some of the highest in the UK, outside central London. Figure
         3.6 illustrates the high level of retail rents and the stability witnessed in the market. However,
         from our discussions with Kingston Chamber of Commerce, the perception of Kingston as a
         retail destination has slipped in recent years. Retailers in the town are beginning to struggle
         to recruit good employees, due to high house prices and large proportion of residents that
         commute away from Kingston to work.




April 2007                                                                   Overview of Kingston 12
Royal Borough of Kingston upon Thames


Figure 3.6 - Retail rates in Kingston, 1999 - 2005 (Source Cushman & Wakefield)
                        350

                        300


                        250

                        200
                £/ft2




                        150

                        100


                        50


                         0
                              1999   2000       2001     2002         2003        2004       2005
                                                         Year

                                       Bentall Centre   Clarence Street      Union Street




3.21     Kingston offers in the order of 7,000 car parking spaces within the town centre. Fenwicks
         and Morley Fund, the major retail stakeholders in Kingston, are seeking to increase the level
         of car parking available in Kingston town centre. As mentioned earlier there is congestion in
         Kingston Town Centre at weekends and when major events are taking place in the area and
         therefore any initiatives to increase the provision of car parking are to be welcomed though it
         is recognised that this will not necessarily reduce congestion. K+20 Area Action Plan
         includes proposals to redistribute and upgrade existing car park capacity and town centre
         attractions to reduce the incidence of queuing for popular car parks.


         Residential

3.22     There is a relatively high concentration of the more affluent AB households across much of
         Kingston's catchment area but especially to the south around Epsom, Leatherhead, Esher
         and Cobham, as well as around Kingston itself and nearby Richmond in the north. Figure 3.7
         illustrates the robust housing market witnessed in Kingston compared to the England and
         Wales average. Kingston is a popular commuter destination, with over 50% of working
         borough residents commuting to employment outside the borough.

Figure 3.7 - Average residential property prices, 1995 to 2006 (Source: Land Registry)




April 2007                                                                               Overview of Kingston 13
Royal Borough of Kingston upon Thames


             £400,000


             £350,000

             £300,000


             £250,000

             £200,000


             £150,000

             £100,000


              £50,000

                  £0
                        1995



                               1996



                                      1997



                                             1998



                                                     1999



                                                             2000



                                                                    2001



                                                                                2002



                                                                                        2003



                                                                                                2004



                                                                                                       2005



                                                                                                              2006
                                             Kingston upon Thames          England & Wales average




         Key Developments in Kingston

3.23     Key developments and other noteworthy factors included in K+20 are as follows:

                Kingston University and Kingston College together have over 30,000 students. The
                University is seeking to expand its presence in the town centre and achieve its objective
                of a single town centre campus; and

                The Rose of Kingston Theatre, part of the Charter Quay development, was completed in
                2002. The Council has recently confirmed funding for the internal fit-out of the 1,000-
                seater auditorium which should be completed by autumn 2007. It is expected that the
                opening of the theatre will have a positive impact on the town centre, attracting
                theatregoers from both the immediate area and farther afield. The development of the
                theatre is an important cultural development which should add significantly to the
                attractiveness of Kingston in the evenings for those seeking a different form of
                entertainment rather than food and beverage outlets/clubs.

3.24     The above developments will lead to Kingston becoming a more popular venue to a broader
         range of range of visitors. The increase in the size of Kingston University should also
         generate more roomnight demand in the town centre through the increased number of
         visiting friends, relatives, lecturers and professionals and this is discussed in more detail in
         the hotel demand section of the report. Appendix A indicates other areas of potential future
         development in the borough.

         Key Developments in London

3.25     Below we highlight some of the major development projects in London that may affect future
         accommodation requirements based upon levels of visitation that these developments are
         expected to generate.




April 2007                                                                                                     Overview of Kingston 14
Royal Borough of Kingston upon Thames


             2012 Olympic Games – In July 2005, it was announced that London is to host the 2012
             Olympic Games. The location of the main Olympic Park will be located in east London.
             The 500-acre site in Stratford is to be regenerated and will be the location of the
             Olympic Stadium, Aquatics Centre, Hockey centre, Velopark and the main Olympic
             Village. Transportation links to and from the Olympic Park will also be improved and a
             significant improvement is expected across the whole London transport network. Whilst
             the majority of events will take place in the east a number are utilising existing venues in
             London.     The redevelopment of the area will bring a significant boost to east London
             and the London economy generally which should have a positive impact on Kingston. In
             Kingston’s case the town has strong links with the Korean community and it is believed
             that there are approximately 10,000 Koreans to be living in the New Malden/Surbiton
             area. In view of these links it could be that the Korean Olympic team could be attracted
             to base itself in the area for both their pre-Olympic training and accommodation
             requirements. This would certainly have a positive impact on the town’s hotels as both
             team members, their coaches and management would require accommodation.

             Terminal 5 Heathrow Airport – construction of the new terminal started in 2002, with
             the first phase due to finish in 2008 and a second phase in 2011.              The project is
             estimated to cost £4.2 billion. Heathrow is one of the busiest airports in the world and
             passenger numbers are expected to grow by 27 million per year as a result of phase
             one, and then by a further 3 million per year after phase two.               Aside from the
             construction of the new terminal, the wider transport infrastructure is also being
             improved. The addition of a new airport terminal has implications for local transport and
             travel to the airport. As a result of this, significant redevelopments to roads and public
             transport in the area were included in the conditions for the development of the terminal.
             These redevelopments are to include extensions to the Heathrow Express and
             Piccadilly lines, a bridge on the A3044 over the M25 and a new railway station
             exclusively for Terminal 5 passengers.


         Tourism

3.26     With its historical past, its location on the River Thames, the strength of its retail offering and
         proximity to other major attractions in the area, make Kingston an attractive destination for
         leisure tourists. This is further enhanced by Kingston’s position as a London Borough as
         London is the most sought-after business and leisure destination in the world.

3.27     Before looking specifically at tourism in Kingston we believe it is relevant to first review
         tourism trends to London as there are events taking place in London that will have some
         ‘knock-on’ impact in Kingston, particularly from a hotel demand perspective.

         Tourism to London



April 2007                                                                    Overview of Kingston 15
Royal Borough of Kingston upon Thames


3.28     Tourism to London can be volatile as London is susceptible to events on the world stage. In
         the recent past London has been impacted by the events of 11 September 2001, SARS, the
         Afghanistan/Iraq conflicts and the bombings in London in July 2005. However, following each
         of these events, tragic and distressing as many of them were, visitation to London has in
         each case bounced back, demonstrating the capital’s resilience and its inherent market
         attractions.

3.29     While the bombings in July 2005 may have deterred some visitors from visiting London, they
         certainly did not avoid the UK altogether. Total inbound visitors during 2005 reached nearly
         30 million, compared to 27.8 million in 2004 – a rise of nearly 8%.




         Figure 3.8: Overseas visitors to the UK (2001–2005)


                                   100%


                                    80%


                                    60%


                                    40%


                                    20%


                                      0%
                                           2001    2002    2003     2004       2005
                 Other nationalities (m)   4.49    4.47    4.53     5.46       6.42
                 Western Europeans (m)     14.12   15.44   16.19    17.94      19.30
                 North Americans (m)       4.23    4.27    4.00     4.36       4.23



        Source: International Passenger Survey

3.30     North Americans were slightly deterred from visiting the UK after the July bombings, their
         numbers decreasing in 2005 after a 2004 rise. However, western Europeans and other
         nationalities were not put off, flocking to the UK in even greater numbers. Compared to 2004,
         7.5% more western Europeans and a staggering 17.7% more visitors from other nations
         came to the UK in 2005.

3.31     The specific breakdown of 2005 visitors by UK destination is not currently available, but it is
         not expected to be markedly different from the previous year. In 2004 England attracted
         around 87% of inbound overnight visitors (22% of which visited London) and Scotland and
         Wales together accounted for less than 15%. London previously accounted for more than
         40% however following the recent terrorist attacks more visitors are heading for destinations
         outside the capital.




April 2007                                                                  Overview of Kingston 16
Royal Borough of Kingston upon Thames


3.32     Latest provisional results from International Passenger Survey show that inbound visits to
         London in the third quarter of 2006 grew by 12.6% compared to the same period last year,
         with almost ten million overseas visitors arriving in the capital.

3.33     Whilst conditions for international and domestic travel remain good, Visit London has revised
         downwards their estimates for 2007 highlighting the weakness of the dollar against the
         pound and the recent UK interest rate rises which are expected to dampen demand.
         Nevertheless the overall forecast remains positive and visitor numbers and spending in the
         capital look likely to grow again in 2007.

3.34     The following charts highlight the historic number of visitors and expenditure into and out of
         the UK.




Figure 3.9: Total travel spending (1996 -2005)
                                            £ millions
                                          40,000


                                          30,000


                                          20,000


                                          10,000


                                              -


                                          -10,000


                                          -20,000
                                                    1996   1997   1998    1999     2000   2001   2002     2003    2004   2005



                                           Overseas residents to UK    UK residents going abroad     Balance (£m)

        Source: International Passenger Survey

Figure 3.10: Number of visits (1996 -2005)
                                  80.0


                                  60.0


                                  40.0
              Visits (millions)




                                  20.0


                                   -


                                  -20.0


                                  -40.0
                                           1996     1997   1998   1999      2000     2001    2002       2003     2004    2005

                                            Overseas residents to UK     UK residents going abroad      Net visitors

        Source: International Passenger Survey

Figure 3.11: Spending per visit (1996 -2005)



April 2007                                                                                                     Overview of Kingston 17
Royal Borough of Kingston upon Thames


                     In £
                  600


                  500


                  400


                  300


                  200


                  100


                   -
                         1996     1997     1998     1999       2000    2001    2002    2003    2004       2005


                        Overseas visitor spend per visit (£)    UK resident spend per overseas trip (£)

        Source: International Passenger Survey

3.35     London is a must-see city for tourists.                      The number of visitors to London and hotel
         occupancy in the city rebounded fairly quickly from the events of July 2005, indicating the
         strength and relative stability of tourism in London. The number of visitors to London in 2005
         increased by 3% over 2004, with 13.8m visitors coming to the capital.                                   Expenditure in
         London during 2005 increased by 6.6% over 2004 to £6.9bn. The 2006 results have not yet
         been published, however, for the twelve months to October 2006, the total number of visitors
         to London was up 6.0% compared to the previous twelve months.

         Tourism to Kingston

3.36     As has already been discussed, Kingston has a wealth of leisure tourism attractions both
         within the town centre and within easy access. The principal attractions of the town itself are
         its historical centre, the river, the huge range of retail possibilities, all of which are supported
         by a large number of food and beverage outlets. Thus for day visitors there is an ample
         supply of different experiences to suit every taste. Kingston also has a lively ‘after dark’
         range of activities, notably the Rotunda and the Oceania nightclub which appeal strongly to
         the young adult market in the community.

3.37     Kingston also provides an excellent base for exploring London and the neighbouring Surrey
         boroughs. For those preferring to use public transport there are train and bus services into
         central London which can be reached in approximately 20 minutes by a non-stop train
         service from Surbiton. The major tourist attractions in the vicinity include Chessington World
         of Adventures (one of the larger attractions in the Royal Borough), Hampton Court Palace,
         Legoland, Kew Gardens, Wisley RHS Gardens, Thorpe Park, Richmond Park, Mercedes
         Benz World at Brooklands and the numerous racecourses in the region. Again, these
         attractions provide for all tastes for adults wanting to stroll in some of the country’s finest
         gardens, to children of all ages enjoying a day out at a theme park.



April 2007                                                                                    Overview of Kingston 18
Royal Borough of Kingston upon Thames


3.38     We have been provided with a copy of a Local Area Tourism Impact model which analysed
         day and overnight visitor numbers and estimated spend of visitors to Kingston. The results
         from the model are summarised in Figure 3.12.

Figure 3.12 - Number of Visitors and Spending in Kingston upon Thames (2004)

         Kingston upon Thames       Overseas visitors    Domestic visitors   Day visitors    Total

         Day Visits (3+ hours)                       -                 -           181        181
         Overnight Visitors                        75                92               -       167
         Number of Nights                          578              260               -       837
         Spending (£)                        33,748              18,363          5,153      57,264
         Source: Local Area Tourism Impact Model




3.39     The impact model indicates that in 2004 Kingston received tourism revenue of some £57.8m
         or 0.4% out of the total estimated for London of £12,890m. While we would prefer not to
         comment on the methodology used in the report, it is worth noting the value of overseas
         visitors whose estimated spend of £33.7m substantially exceeds the spend of domestic and
         day visitors combined (£23.5m).

3.40     In its future tourism marketing campaigns, it would be well worth Kingston focusing on
         overseas visitors given the significance of their spending when compared with the domestic
         and day visitor markets. In this regard the presence of an internationally branded hotel in
         Kingston town centre could have a very positive effect as overseas visitors would recognise
         the brand and be attracted to visit the town on the strength of brand recognition and loyalty.
         This is true of both commercial and leisure visitors.


         Communications

         Airport

3.41     The nearest airports to Kingston are London Heathrow (10 miles) and London Gatwick (24
         miles). Both airports are operated by BAA plc and are two of the world’s busiest airports. In
         2005 the combined airports handled over 100m passengers. Both airports have witnessed a
         recovery in passenger numbers following the worldwide general economic downturn, effects
         of 9/11 and the Afghanistan/Iraq conflicts. London Heathrow is the headquarters of many UK
         airlines including British Airways. The medium term prospects for both airports are good,
         including the development of T5 at London Heathrow, as described earlier.

3.42     Both airports can be reached via the road network and public transport system, and given
         Kingston’s proximity to Heathrow it is feasible for airline passengers to stay there before
         travelling to the airport to catch their flights, but it is likely that hotels in the Hillingdon area




April 2007                                                                       Overview of Kingston 19
Royal Borough of Kingston upon Thames


         would be first choice. An hourly bus service operates from Kingston to Heathrow, originating
         in Croydon.

         Rail

3.43     Kingston’s suburban station is connected to the southwest London mainline rail network via
         stations at Wimbledon and Clapham Junction and train services are provided by South West
         Trains. Surbiton, which is 2.3 miles from Kingston town centre and within the Royal Borough,
         is on the mainline network and offers more direct services to London Waterloo and to the
         south coast, eg Portsmouth and Southampton.

3.44     The rail network for Kingston and the surrounding area is illustrated below in Figure 3.13.
         Kingston Station is located in the town centre, close to Cromwell Road bus station, on Wood
         Street. The location of the railway station is only a short distance from the PS1, EDF and
         Vicarage Road potential hotel sites.

Figure 3.13 - Southwest London rail network




         Road

3.45     The Kingston area enjoys good communication links with London and the southeast via the
         M25 and M3 motorways, and the A3, which is a major trunk road linking the M25 with
         Central London. See Appendix B for a detailed map illustrating Kingston’s road network.

3.46     The A307 (Portsmouth Road) runs through Kingston and connects Cobham and Esher with
         Richmond-upon-Thames. Kingston’s one-way system can be prone to congestion during
         peak periods, midweek and at weekends. The highest flow of traffic is over Kingston Bridge,
         where some 18,000 cars pass between 7am and 7pm.

3.47     Kingston has one of the major bus network hubs in southwest London, linking south, central
         and west London, and has witnessed a 40% increase in the number of passengers over the
         past three years.




April 2007                                                               Overview of Kingston 20
Royal Borough of Kingston upon Thames


         Conclusion

3.48     Kingston enjoys a range of complementary attributes that has led to it becoming one of the
         leading retail destinations in the country. The economic base of the town centre is firmly
         founded in the retail sector, the town has a strategic location vis à vis London and the south
         coast via the A3 and the rest of the country via the M25, has good train connections to
         London and it is at the heart of one of the most affluent areas of the country. Kingston is
         located on the River Thames and is a highly desirable residential area, given its proximity
         and links to London. The only area where the town lacks competitive advantage is from the
         office market perspective.

3.49     From the tourism standpoint Kingston has much to offer. The breadth and quality of the retail
         facilities in the town centre together with being in easy reach of a wide variety of cultural and
         recreational visitor attractions, give Kingston a significant edge over many other London
         boroughs. The latter, however, may benefit by enjoying a closer location to central London,
         but with its transport links Kingston is not over-disadvantaged in this regard.

3.50     Taking the above factors into account it is our view that Kingston has the necessary
         characteristics to support quality hotel development given its location and its economic and
         tourism attributes.




April 2007                                                                   Overview of Kingston 21
Royal Borough of Kingston upon Thames



4        Hotel Supply in London and the Kingston Area
         Introduction

4.1      As Kingston is a London Borough, it is first relevant to review and comment on the supply of
         accommodation in London generally and then review Kingston’s position in that market. We
         then review hotel supply in Kingston itself, describing what we consider to be the primary
         competitive hotel market in the Kingston area. As Kingston is inextricably linked with
         northeast Surrey geographically, we make reference to the hotel supply in the Boroughs of
         Elmbridge, Mole Valley and Epsom & Ewell, but we do not consider that the hotels in these
         districts compete directly with the Kingston hotel market.


         Current Supply of Hotel Accommodation in London

4.2      As illustrated in Figure 4.1 hotel supply in London is dominated by three and four-star
         properties with 64% of the market measured by the number of bedrooms. The five-star
         market accounts for 12% of the market and the majority of all these rooms are located in
         central London Boroughs. The branded budget sector accounts for 20% of all hotels in
         London, however, only 16% of the bedrooms reflecting the average size of hotel being
         smaller. Over the last five years the total hotel supply in London has grown across all-star
         levels, except for two-star supply which has seen a significant decline in hotels. This
         segment has declined primarily as a result of hotels being upgraded to higher star ratings,
         converted to branded budget accommodation or change of use to residential units.

4.3      From Figure 4.1 it is worth noting the significant increase in the supply of budget
         accommodation which has been the fastest growing hotel sector in the UK in recent years.
         This reflects budget hotels’ appeal across the market where such hotels respond well to the
         requirements of both business and leisure guests alike, particularly those with budgetary
         constraints.

Figure 4.1 - Total Hotel Supply in London 2002-2006




April 2007                                      Hotel Supply in London and the Kingston Area 22
Royal Borough of Kingston upon Thames


4.4      In Figure 4.2 overleaf we present Visit London’s breakdown of hotel room supply across
         London by Borough and also the change in hotel room supply over the past five years.




April 2007                                  Hotel Supply in London and the Kingston Area 23
 Royal Borough of Kingston upon Thames


Figure 4.2 - Accommodation in London by Borough
 Rank    London Borough        Hotel bedrooms
 1       Westminster                   26,103
 2       Camden                        11,655
 3       K&C                           11,274
 4       Hillingdon                     8,161
 5       Tower Hamlets                  3,035
 6       Newham                         2,432
 7       H&F                            2,248
 8       Islington                      1,749
 9       Southwark                      1,745
 10      Lambeth                        1,626
 11      Croydon                        1,605
 12      City                           1,385
 13      Hounslow                       1,337
 14      Ealing                         1,002
 15      Brent                            980
 16      Richmond                         830
 17      Hackney                          702
 18      Harrow                           604
 19      Barnet                           578
 20      Havering                         553
 21      Enfield                          495
 22      Merton                           458
 23      B&D                              431
 24      Kingston                         403
 25      Greenwich                        395
 26      Wandsworth                       283
 27      Bexley                           250
 28      Waltham Forest                   248
 29      Redbridge                        228
 30      Sutton                           212
 31      Bromley                          210
 32      Lewisham                         181
 33      Harringey                         62


Source: VisitLondon Hotel Development Monitor




April 2007                                        Hotel Supply in London and the Kingston Area 24
Royal Borough of Kingston upon Thames


4.5      From Figure 4.2 it can be seen that hotel supply in London is concentrated in London’s
         central Boroughs, which is unsurprising as visitors to London, whether commercial or leisure,
         would wish to be in as close proximity as possible (subject to budget constraints) either to
         the place of work they were visiting or the sights they wished to see. Westminster has the
         largest supply of hotel bedrooms (26,103), followed by Camden (11,655) and Kensington &
         Chelsea (11,274). In 4th position is Hillingdon (8,161), reflecting the significance of Heathrow
         Airport. After the four abovementioned Boroughs there is a large gap and the next most
         significant Borough in terms of hotel bedroom supply is Tower Hamlets with 3,035 hotel
         bedrooms, reflecting the concentration of bedrooms in the Canary Wharf area.

4.6      Royal Kingston has one of the lowest numbers of hotel rooms by London Borough, ranked
             th
         24       out of the 33 London Boroughs, with 403 bedrooms available. The neighbouring
                                                   th                  th
         Boroughs of Wandsworth (ranked 26 ) and Sutton (30 ) have fewer bedrooms than
                                                                                 nd
         Kingston, while Merton has slightly more with 458 and is ranked 22 . Richmond has 830
         hotel bedrooms ranking it at number 16. This equates to a total of 2,186 hotel bedrooms
         across the five London Boroughs.

                                       th
4.7      Croydon, which is ranked 11 , and reflects its position as London’s largest strategic office
         centre after central London. Croydon is actually London’s largest “Metropolitan” centre and is
         expected to receive over £2bn worth through planned regeneration projects over the next ten
         years. This has meant that it has received a lot of interest from hotel developers and this
         trend is likely to continue over the short to medium term.

4.8      Kingston is one of the 19 London Boroughs that have witnessed growth in hotel room supply
         over the past five years, albeit with only the additions of the Travelodge Kingston Town
         Centre and Travelodge at Tolworth. The significant increases were apparent in the more
         centrally located London Boroughs of Newham, Tower Hamlets and Hackney reflecting the
         substantial amount of hotel development in the Docklands area. Merton was the only ‘outer’
         London Borough which registered an increase of more than 50%; however, this is off a very
         low base.

4.9      As we shall discuss in the section on new hotel supply in London, it can be seen that the
         regeneration of East London and the prospect of the Olympic Games in 2012 are having an
         impact on hotel development projects in that area. Further, the shortage and prohibitive cost
         of hotel sites in central London is compelling developers and hotel companies to seek
         locations outside the central core which is driving new hotel development south in particular,
         which is very encouraging for Kingston.




April 2007                                      Hotel Supply in London and the Kingston Area 25
Royal Borough of Kingston upon Thames


             Current Supply of Hotel Accommodation in Kingston Area

             Introduction

4.10         In this section we review the existing supply of hotel accommodation in Royal Kingston. We
             also review the supply of conference and meeting space in the area.

4.11         As well as Kingston’s existing hotel supply we have also identified and described the
             competitive hotel supply in the adjacent London Boroughs, as we feel that these hotels
             would be competitive to any future hotel developed in Kingston Town Centre.

4.12         Finally, any potential new hotel supply to the area is also identified and evaluated in this
             section.

             Market Overview

4.13         The supply of hotel accommodation in Kingston itself and in the Kingston surrounding area is
             as follows:

Figure 4.3 - Hotel supply in Kingston and the surrounding area

        Hotel name            Operator        Star            Location          Number of         Tariffs (£)
                                             rating                             bedrooms
                                                                                            Midweek1     Weekend1

  Travelodge               Travelodge       Budget          Kingston Town           72          69.00            69.00
  Kingston                                                      Centre
  Travelodge               Travelodge       Budget            Tolworth             120          59.00            59.00
  Tolworth
  Kingston Lodge           Brook Hotels     3-star            Kingston              63        130.002            90.002
  Hotel Antoinette         Independent      3-star            Kingston             100          80.00            73.00
  Premier Travel Inn       Premier          Budget     Chessington South            48          67.00            60.00
  Fairmile                 Travel Inn
                                                       Kingston sub-total          403
  White Hart Hotel         Fullers Hotels   3-star          Hampton Wick            36         130.00           100.002
  The Mitre                Carlton Hotels   4-star          Hampton Court           32         115.00           135.00
                                                                                                    2
  The Lion Gate            Independent      3-star          Hampton Court           37        109.00            109.002
  Richmond Hill Hotel      Folio Hotels     3-star          Richmond upon          138         165.00           165.00
                                                               Thames
  Richmond Gate            Folio Hotels     4-star          Richmond upon           68         185.00           185.00
  Hotel                                                        Thames
  Petersham Hotel          Independent      4-star          Richmond upon           60        135.002            95.002
                                                               Thames
                                                            Surrounding area       371
                                                                    sub-total
                                                                Grand Total        774
  Source: PKF Research
  1
      Includes VAT and service, based on single occupancy
  2
      Includes breakfast




April 2007                                                  Hotel Supply in London and the Kingston Area 26
Royal Borough of Kingston upon Thames


4.14     Appendix E includes the definitions of UK hotel classifications.

4.15     Figure 4.3 above identifies those hotels that we consider comprise the primary competitive
         hotel market in the Kingston area which equates to 774 hotel bedrooms. In addition, there
         are a further 269 bedrooms at designated conference centres totalling 1,043 bedrooms
         available in total (discussed below), excluding bedrooms in B&Bs and guesthouses. The
         immediate Kingston hotel market comprises two three-star properties (163 rooms in total)
         and three budget hotels (240 rooms). Kingston itself, therefore, lacks any four or five-star
         hotel supply.

4.16     In the wider market context there are three four-star hotels (160 rooms in total) and three
         three-star properties (211). In total, therefore, the market is dominated by three-star and
         budget hotels with a smaller number of four-star hotel rooms, although these are located at
         Hampton Court and Richmond and not in Kingston Town Centre.

         Hotel Descriptions

4.17     The location of the key competitive and future hotel supply is illustrated in Figure 4.5 on page
         29. Below we identify the primary competitive hotels in the Kingston area:

             Travelodge Kingston - opened in 2003, this 72-bedroom hotel located on Old London
             Road and is the only hotel in Kingston town centre. The hotel offers no parking
             provision, restaurant, meeting, banquet or leisure facilities. It only offers a small
             reception area and a drinks/food vending machine.

             Kingston Lodge – Following the administration of Swallow Hotels, Kingston Lodge was
             acquired by Brook Hotels. Interviews with representatives of Brook Hotels indicate that
             the hotel performs well both at weekdays and weekends, particularly when there are
             major sporting/cultural events taking place in the area. The hotel has 63 rooms and is
             situated a quarter of a mile from Kingston town centre, close to Richmond Park and
             adjacent to Coombe Wood Golf Course.

             Hotel Antoinette - this 100-bedroom independently operated hotel is located close to
             Kingston University (Penrhyn Road campus), on the border of Kingston and Surbiton. It
             is the amalgamation of 27 Victorian town houses. The hotel has recently undergone a
             refurbishment of all bedrooms and public spaces. The hotel has free car parking for 100
             vehicles. During our interview with representatives of the property we were made aware
             that the hotel performs strongly throughout the midweek period and when major events
             are taking place in the southwest London area.

             Travelodge Tolworth - this 120-bedroom hotel occupies a number of floors adjacent to
             Tolworth Tower and the A3. This hotel opened only 12 months ago, but is already a key
             competitor in the local market. Negligible meeting facilities are available.




April 2007                                      Hotel Supply in London and the Kingston Area 27
Royal Borough of Kingston upon Thames


             Premier Travel Inn Chessington (The Fairmile) - situated along the A243 (Leatherhead
             Road) south of Chessington World of Adventures, this 48-bedroom budget hotel is
             linked to the Fairmile Arms public house which serves breakfast for guests and food all-
             day. The hotel records very high occupancies during Monday to Thursday generated by
             strong local corporate demand. The hotel has no significant meeting or leisure facilities.

             Richmond Hill Hotel - this converted Georgian mansion is in the Corus Hotels chain, and
             is situated within easy walking distance of Richmond town centre and the railway
             station. The hotel with its 138 bedroom and 16 meeting rooms is a popular corporate
             events and function venue.

             Richmond Gate Hotel - situated adjacent to the Richmond Hill Hotel, overlooking
             Richmond Park, this 68 bedroom hotel is also part of Corus Hotels. Park rooms are at a
             premium as they offer excellent views. Both this hotel and Richmond Hill offer access to
             Cedars Health and Leisure Club and between them offer 150 private parking spaces.

             The Petersham Hotel - situated on Richmond Hill, this privately owned hotel dates back
             to 1865. The hotel has 60 bedrooms, a two AA rosette restaurant and conference suites
             that overlook the River Thames.

             The White Hart - This 37 room hotel is owned and operated by Fullers Brewery. It is
             located across Kingston Bridge in Hampton Wick and the hotel is fronted by a popular
             pub. The hotel has no conference facilities but has a close link with Raven’s Ait,
             described below.

             The Mitre Hotel - This four-star hotel dates back to 1665 and is situated on the banks of
             the River Thames and opposite the Hampton Court Palace. This 36-bedroom hotel has
             three meeting rooms with a maximum capacity of 100 delegates.

                                            th
             The Liongate Hotel - This 18 century town house is a three-star hotel situated opposite
             Hampton Court Station and has 32 bedrooms. The hotel also has limited conference
             and meeting facilities with a maximum capacity of 80 delegates.


         Conference Centres/Facilities Supply

4.18     In addition to reviewing the local hotel market we have also looked at the provision of
         conference/events facilities in the area. Apart from Raven’s Ait and Dorich House (and to
         some extent Sandown Park) all of the conference centres are residential and therefore have
         overnight accommodation facilities. These facilities however, are reserved for conference
         delegates and are not generally available to non-conference visitors.

4.19     Figure 4.5 illustrates their respective locations.




April 2007                                        Hotel Supply in London and the Kingston Area 28
Royal Borough of Kingston upon Thames


             Warren House - This dedicated conference centre, with 45 bedrooms, is located
             northeast of Kingston town centre. It offers one large conference room with capacity for
             120 delegates theatre-style and 6 further smaller meeting rooms. It is set in a well
             landscaped environment and its quality surpasses that of most of the nearby hotels.

             Lensbury Centre - Formerly the Shell Sports and Social Centre in Teddington the
             Lensbury Centre has 150 bedrooms. The centre is set within 25 acres, with river
             frontage close to Teddington Lock. It offers five conference and event rooms, with a
             maximum capacity of 180 delegates in its Thames View Suite.

             Dorich House - Kingston University’s non-residential conference centre is located in
             Kingston Vale, north of the town centre. This house can host conferences for up to 56
             delegates and is set within excellent grounds and also has museum status.

             Woodstock House - This SHL conference and management centre is located in Long
             Ditton, close to Surbiton. It has 74 bedrooms and 31 meeting rooms available and
             typically hosts small meeting and training events for between 4 and 80 delegates.

             Sandown Park - The course and its facilities occupy a spectacular setting overlooking
             the Surrey countryside and date back to 1875. The stand has three exhibition halls and
             23 meeting rooms with capacities varying between two and 1,000 people (banquet
             style), many of which have magnificent views over Sandown Park and Surrey. Esher
                                                                                                    2
             Hall, Surrey Hall and the Grandstand and Sandown Suites offer almost 5,000m of
             space, most commonly used for shell scheme exhibitions and table top fairs. The
             Eclipse Pavilion was opened in 2003 and is a purpose-built air-conditioned pavilion
             which includes 23 meeting rooms. There is limited hotel accommodation available in
             Hunters Lodge which has 21 bedrooms.

             Ravens Ait - This island conference and events location offers no bedroom
             accommodation. It is a very popular weddings and function venue, however, due to its
             island location and lack of car parking, its access and utilisation are somewhat limited.

         Hotel Supply in Northeast Surrey

4.20     For reference purposes we have included a table summarising the supply of hotel
         accommodation in the northeast Surrey Boroughs of Elmbridge, Mole Valley and Epsom &
         Ewell. We believe that the hotels in these Boroughs will serve the local needs of the key
         towns within those Boroughs and would not compete directly with hotels in the Kingston
         area.

4.21     Thus in Elmbridge the towns with hotel accommodation are Esher, Cobham, Weybridge and
         Walton-on-Thames. With the exception of the Hilton and Woodlands Park at Cobham and
         Oatlands Park in Weybridge, the rest of the hotel supply in these areas is either branded




April 2007                                      Hotel Supply in London and the Kingston Area 29
Royal Borough of Kingston upon Thames


         budget or three-star independent. In Mole Valley the towns/villages              with hotel
         accommodation are Bookham, Charlwood, Dorking and Leatherhead. In this area there are
         two Macdonald hotels, the Burford Bridge and the White Horse at Dorking with the balance
         as before being either branded budget or three-star independent. In Epsom & Ewell there
         are only hotels in Epsom which are all either branded budget or three-star independent.

4.22     In Figure 4.4 below we present a summary of hotel supply in northeast Surrey.

Figure 4.4 - Hotel supply in northeast Surrey

                        Borough          Number of Hotels   Number of Bedrooms

                        Elmbridge               10                  509
                        Epsom & Ewell            5                  213
                        Mole Valley              8                  493
                        Total                   23                 1,215
                        Source: PKF research




4.23     By comparison to the neighbouring Boroughs of northeast Surrey, Epsom & Ewell has only
         213 hotel bedrooms, while Elmbridge and Mole Valley have a greater number than Royal
         Kingston, with 509 and 493 respectively. See Appendix G for a list of all the hotels included
         in each Borough.

         Conclusion

4.24     Hotel supply in London is concentrated north of the River Thames in the West End
         (Westminster, Camden and Kensington and Chelsea) and there are further concentrations in
         Hillingdon, servicing Heathrow Airport and the Docklands/Canary Wharf areas, servicing the
         large amount of new office developments that have taken place. Outer London Boroughs
         have a much smaller supply of hotel accommodation, which includes Kingston. Kingston’s
         own supply of accommodation is dominated by budget and three-star hotels and it lacks any
         four or five-star properties. Nevertheless, as demonstrated in the previous section, Kingston
         has a good economic base and a strategic location, both of which are positive factors as for
         as hotel development is concerned.




April 2007                                      Hotel Supply in London and the Kingston Area 30
Royal Borough of Kingston upon Thames


Figure 4.5- Map of competitive and future hotel and conference centre supply in Kingston and Surrey


                                                                                                                                Key

                                                                                                                                   Kingston Town Centre
                                                                                                                                Competitive hotel supply
                                                        1                                                                       1 Travelodge Kingston
                                                                        6
                                                                          7                                                     2 Kingston lodge
                                                                        8
                                                                                                                                3 Hotel Antoinette

                                                                                                                                4 Travelodge Tolworth

                                                                                            3                                   5 Premier Travel Inn, Fairmile

                                                                                                                                6 Richmond Hill Hotel
                                                                 2
                                                                                        1                                       7 Richmond Gate Hotel
                                                                                    2                                           8 The Petersham Hotel

                                                                    9                                                           9 The White Hart
                                                                        1                                                       10 The Mitre
                                                       11                                                                       11 The Liongate
                                                      10                    3                                                   Future hotel supply
                                                                    6
                                                                                                                                   Twickenham

                                                                                                                                   Chessington

                                                                                4                                                  Brooklands
                                                                    4
                                                                                                                                   Epsom Racecourse
                                                5
                                                                                                                                Conference supply

                                                                                                                                   Warren House

                                                                                                                                   Lensbury Centre

                                                                                                                                   Dorich House
             3                                                                                                                     Woodstock House
                                                                 2
                                                                                                                                   Sandown Park Racecourse
                                                                5                                                                  Ravens Ait

                                                                                                4




April 2007                                                                                          Hotel Supply in London and the Kingston Area 31
Royal Borough of Kingston upon Thames


         New Hotel Supply in London

4.25     In Figure 4.6 overleaf we present the future hotel supply that is currently under construction
         or likely to begin shortly and therefore enter the market over the next two years. As the map
         illustrates the majority of all future supply is concentrated in and around the Central London
         Boroughs or at prime communication locations, eg Heathrow.

4.26     Having considered the distribution of existing hotel bedrooms across London by Borough
         (see Figure 4.2) it is apparent that the focus of the future hotel supply is focused on three
         key locations; South Central London, West London and The City. These Boroughs, except
         West London due to its proximity to London Heathrow Airport, were not traditional hotel
         destinations before, however due to availability of sites and changes in demand these areas
         are now the key focus. The City and South Central London are now the focus for hotel
         developers over the short to medium term.

4.27     According to the GLA’s Hotel Demand Study to meet the expected increase in domestic and
         international tourist demand it is estimated that a further 40,000 extra hotel rooms might be
         required over the 2007-2026 period. The report predicts that the areas most likely to receive
         most growth are those areas close to major transport connections, ie Heathrow, Paddington
         and Victoria and in areas of planned redevelopment or regeneration, ie East London and the
         Olympic Park.

4.28     As the map illustrates major new hotel development will be taking place in the South Central
         area, dominated by the Park Plaza Westminster Bridge Roundabout project with 953 rooms.
         Development in the area is significant as it is taking place south of the River Thames.
         Traditionally, hotel development south of the river was not considered by developers.
         However, this is no longer the case and Boroughs such as Southwark and Lambeth are
         regarded as appropriate locations for hotel development. This reflects the lack of available
         sites and prohibitive costs north of the river. Such development is propitious for Kingston as
         hotel projects south of the river will no longer be regarded as particularly unfavourable. The
         other main area for development is to the west with a number of projects at Heathrow,
         dominated by the Sofitel project at T5 with 600 bedrooms.




April 2007                                     Hotel Supply in London and the Kingston Area 32
Royal Borough of Kingston upon Thames


Figure 4.6 - New hotel supply in London




April 2007                                Hotel Supply in London and the Kingston Area 33
    Royal Borough of Kingston upon Thames


               Future Hotel Supply in Kingston and the Surrounding Areas

   4.29        We are aware of a number of potential hotel developments which are expected to enter the
               immediate area over the next few years which will create new competitive supply and are
               described in Figure 4.7 below. The location of each of these firm/potential projects is shown
               in Figure 4.5 on page 29.

   Figure 4.7 – Future new supply
Hotel                 Location         Rooms      Delivery    Likelihood                     Comments

Marriott           Twickenham              156       2007          High    Redevelopment of the South Stand will include
Twickenham                                                                 a four-star 156 bedroom Marriott hotel with
                                                                           additional conference facilities.

Chessington        Chessington             150       2007          High    Unbranded hotel located within the grounds of
World of                                                                   the theme park
Adventures

       Sub-total                           306
Dairy Crest        Surbiton                100       2008       Medium     Interest in the redevelopment of this office
                                                                           block has surfaced recently. Planning has
                                                                           been approved for an 88 bedroom hotel on this
                                                                           site; however the owner is yet to begin
                                                                           construction.

Accor              Sutton                  200       2008       Medium     Unable to ascertain any definite information.
                                                                           Seeking to develop an Etap hotel in the town
                                                                           centre

Celotex Site       Sunbury                 130    Unknown          Low     Outline planning permission has been obtained
                                                                           for a budget style property.

PS1 or EDF site    Kingston upon           150    Unknown          Low     A planning application was submitted for a
                   Thames                                                  proposed hotel on this site in 2006. It has not
                                                                           yet been determined.
           Total                           886
Source: PKF research and Hotels Data Ltd


   4.30        The next four hotels expected to open in the area are all associated with leisure/sporting
               attractions, namely Twickenham, Chessington World of Adventures, Brooklands and Epsom
               Downs Racecourse.

   4.31        The reason for this trend is that many leisure/sporting venues are now seeking to become
               ever more financially sustainable, aiming to be 365 days a year operations, and moving
               away from being heavily dependent on a limited number of events, eg Twickenham hosts
               approximately 15 matches and Sandown Park holds some 26 race meetings per annum. The
               addition of a hotel/conference facility allows them to achieve greater utilisation of their
               available facilities and provide vital extra income streams. Nevertheless, for the
               hotel/conference facility economics to work, the critical factors of location and relationship to
               demand generators still apply.

   4.32        On reviewing the future projects described in Figure 4.7, we can assume an increase of
               some 306 rooms is likely to be realised by 2009. However, according to our research there



   April 2007                                          Hotel Supply in London and the Kingston Area 34
Royal Borough of Kingston upon Thames


         are 2,186 hotel bedrooms in the five southwest London Boroughs of Royal Kingston,
         Wandsworth, Sutton, Merton and Richmond. The planned increase of 306 rooms based on
         this supply of accommodation is therefore only equal to a 14% increase in supply. The
         projects in Surbiton, Sutton, Sunbury and Kingston have not been included at this stage as
         they are still speculative.

4.33     It is also understood that the Travelodge Tolworth is thought to be seeking planning approval
         for an additional 100 bedrooms, almost doubling the size of the hotel from its current 120
         rooms. An extension of this magnitude would clearly indicate that demand for the hotel is
         strong, reflecting the strength of demand for accommodation in the area.

4.34     We believe that it is also relevant to make reference to the 86-bedroom Brooklands Hotel
         albeit it is in Surrey and not in a London Borough. The Brooklands Hotel is intended to be a
         high-quality hotel, operated by Columbus Hotels, located adjacent to the new Mercedes-
         Benz World at Brooklands. This hotel should attract significant attention to the area in terms
         of hotel accommodation as traditionally the area has been dominated by the branded budget
         and three-star market. The intention to position the hotel at the upper end of the market
         reflects the operator’s view that the area and the market are capable of supporting high
         quality accommodation and this is a useful indicator as far as the opportunities for a quality
         hotel in Kingston are concerned.


         Conclusion

4.35     Given its size, strategic location and level of visitation that Kingston receives, we believe that
         the town is considerably undersupplied as far as hotel provision is concerned and lacks any
         quality hotel accommodation within walking distance of the town centre. The only supply in
         the town centre is the Travelodge, the remaining supply is either independently owned and
         operated hotels or provincial three and four-star hotels located on the town’s periphery. The
         nearest quality hotel (with four-star grading) is not located within Kingston at all, but in
         Richmond.

4.36     Due to the level of hotel supply compared to the strength of Kingston as a commercial
         destination we believe that Kingston requires additional quality hotel supply to compete with
         the standards of accommodation being made available by its London peers, eg Wimbledon
         (three hotels with 141 bedrooms in total), Sutton (one hotel with 116 bedrooms) and Croydon
         (eight hotels with 803 bedrooms), all of which have at least one quality hotel in their
         respective centres.




April 2007                                       Hotel Supply in London and the Kingston Area 35
Royal Borough of Kingston upon Thames



5            Demand for Hotel Accommodation in
             Southwest London
             Introduction

5.1          This section describes demand for hotel accommodation in southwest London, which
             includes Kingston, by market segment, as well as analysing the seasonality of the market.


             Market Performance

5.2          In Figure 5.1, we present the room occupancy, average room rate and rooms yield for a
             representative sample of hotels in the southwest London Boroughs of Royal Kingston,
             Wandsworth, Sutton, Merton and Richmond. The hotels included in this sample are Kingston
             Lodge, Richmond Hill Hotel, Cannizaro House, Holiday Inn Sutton and Express by Holiday
             Inn Wimbledon South. Thus the sample is representative of the hotels that comprise the
             primary competitive market in Kingston and the majority of market sectors area included,
             from budget to four-star hotels. There are no five-star hotels in the sample; however, these
             are not relevant as there are no five-star hotels in southwest London.

      Figure 5.1 – Recent hotel market performance for a sample of hotels in southwest
      London Boroughs. 2001 to 2005

              Year            Occupancy        Average room rate     Rooms yield         Growth

                                  %                   £                   £                %
      2001                        74.0%                82.46              61.01
      2002                        70.0%                80.01              56.01            -8.2%
      2003                        69.3%                77.65              53.85            -3.9%
      2004                        70.7%                83.80              59.28            10.1%
      2005                        70.3%                83.31              58.55            -1.2%
      2006                        76.0%                88.75              67.45            15.2%

      CAGR                                             1.5%               2.0%

      Source: PKF database



5.3          We comment as follows:

                 Rooms yield (also referred to as REVpar, or revenue per available room) dipped in 2002
                 and again in 2003 in the aftermath of the 11 September 2001 events, the impact of
                 SARS and the conflicts in Afghanistan and Iraq.

                 In 2004 rooms yield grew by 10.1% compared with 2003 demonstrating the ‘bounce
                 back’ which is characteristic of hotels in London. The 2005 performance practically
                 mirrored that of 2004, to some extent demonstrating the consistency of the market,




April 2007                                Demand for Hotel Accommodation in Southwest London 36
Royal Borough of Kingston upon Thames


             however, it should be remembered that the latter part of 2005 was affected by the 7 and
             21 July bombings/attempted bombings which caused a downturn in performance. In
             2006 performance leapt up by 15.2%, which was broadly in line with the overall
             experience in London where rooms yield grew by 17.4%, according to PKF’s Monthly
             UK Trend statistics. While the improvement in 2006 is striking, it should be noted that
             the result was flattered by the downturn in 2005 caused by the July bombings.

             While the recent performance is encouraging it is worth reflecting that the occupancy
             achieved in 2006 was only two percentage points higher than in 2001 which was to
             some extent affected by 9/11. Discounting the average room rate of £88.75 in 2006 by
             an average of 2% per year to reflect inflation would yield a rate of £80.38. Thus, in real
             terms, the average rate achieved in 2006 is lower than that in 2001. Given the 76%
             occupancy in 2006 compared with the 74% occupancy in 2001 means that rooms yield
             is about the same in each case on a like for like basis.


         Market Seasonality

5.4      In Figure 5.2, we illustrate the monthly seasonality characteristics of the southwest London
         hotel market. Based on our trend statistics and discussions with a number of hoteliers in the
         area we comment as follows:

             The peak months are typically June, July and September which benefit from key events
             in the area at those times such as Wimbledon fortnight in June and the Hampton Court
             Flower Show in July. June and September are also both strong months for corporate
             demand midweek.

             Outside key events in the area, the highest level of demand for hotels in southwest
             London is usually between Monday and Thursday, reflecting the area’s propensity for
             corporate business. Mondays and Thursdays are ‘shoulder’ days with Tuesdays and
             Wednesdays being peak days. Local hotels are also popular for residential conferences
             midweek which further strengthens occupancy at that time. According to our database,
             hotels in southwest London achieve, on average, a midweek room occupancy of
             approximately 80%.

             At weekends occupancy is generally not as buoyant as midweek, particularly in the
             winter months; however, room occupancy on Saturdays can be boosted by leisure break
             guests or those visiting friends and relatives (VFR), or attending weddings or other
             events in the area. When major events are taking place at weekends, eg Wimbledon,
             Hampton Court Flower Show, hotels can expect to be full. According to our database,
             hotels in southwest London achieve, on average, a weekend room occupancy of
             approximately 60%.




April 2007                           Demand for Hotel Accommodation in Southwest London 37
 Royal Borough of Kingston upon Thames


                January and December are the weakest months due to impact of the Christmas holiday
                period, the end/start of the year when many companies are engaged in planning
                activities and therefore fewer company executives are travelling, and weekend demand
                is low due to poor weather. Occupancy levels at this time of year can be below 65%.

 Figure 5.2 – Seasonality of demand, Kingston area hotel market, 2005-2006


             90.0%
             85.0%
             80.0%
             75.0%
             70.0%
             65.0%
             60.0%
             55.0%
             50.0%
             45.0%
             40.0%
                       Jan   Feb     Mar      Apr       May       Jun      Jul     Aug      Sep      Oct         Nov   Dec

                                                                 2005            2006



Source: PKF database


          Market Segmentation

5.5       In Figure 5.3 we highlight the market segmentation of a sample of southwest London hotels
          in 2005 (latest available data). It should be noted that there area no budget hotels in this
          sample and therefore the statistics are based on the performance of three-star and four-star
          hotels.

  Figure 5.3 – Market segmentation, southwest London hotels in 2005




                                                    9.0%          2.7%
                                       9.6%

                                                                                                         47.9%



                                   13.9%


                                                    17.0%




                                   Corporate discount         Full rate                  Leisure Break
Source: PKF database               Conference Exhibition      Group/Tour                 Other




April 2007                                    Demand for Hotel Accommodation in Southwest London 38
Royal Borough of Kingston upon Thames


We comment as follows:

             The corporate discount segment is the major demand generator for the selected sample
             of hotels, representing nearly 50% of demand in total. That corporate demand is the
             major demand generator is unsurprising as the midweek period is 4/7ths of the week
             and given the amount of corporate activity in southwest London.

             Full rate demand is the next largest segment with 17% of the total. Much of this demand
             will also be corporate representing those guests travelling on business without a prior
             negotiated rate at the hotel. We expect that there would be a leisure component to the
             full rate segment, reflecting those visiting the area for key events and not at packaged
             leisure break rates.

             Leisure Break was the third largest segment in the area with almost 14% of the market;

             Conference demand is just under 10%, largely due to the limited availability of
             conference/meeting space of the hotels comprising the sample;

             Aircrew demand is not a contributing factor to the hotels in the sample, despite proximity
             to Heathrow and Gatwick. Generally speaking aircrew are accommodated either directly
             at the airport (particularly at Gatwick), or in central London hotels, especially those
             hotels with easy access to the A4/M4.


         Characteristics of Demand

5.6      While we have briefly described some of the demand characteristics above, as they relate to
         the segmentation of demand statistics, in this section we further review the characteristics of
         demand as they relate to hotels in the Kingston area. This has been based on our market
         research programme in the area.

         Corporate Demand

5.7      Corporate demand is generated by the companies in the surrounding vicinity, in particular
         Kingston,   Richmond, Chessington, Weybridge,           Surbiton and Walton-upon-Thames.
         Corporate demand is generated by company executives/representatives travelling to visit
         customers/suppliers/regional offices for individual or group meetings during the midweek
         period. Given the substantial retail presence in Kingston, it is likely that many representatives
         visiting the major stores require overnight accommodation and will therefore use the facilities
         in the town. Equally there will be visitors to other companies in the Kingston area that require
         overnight accommodation.

5.8      From our interviews we became aware of a level of ‘frustrated or unaccommodated’ demand
         in the area. This refers to travellers who have not made a hotel reservation, arrive at the
         hotel and have to be turned away and those who have not booked far enough in advance



April 2007                           Demand for Hotel Accommodation in Southwest London 39
Royal Borough of Kingston upon Thames


         and whose first choice of hotel is not available. From our research we identified that many of
         the hotels experience a significant number of days when they are full and are having to turn
         business away. Having looked at the performance of three hotels which will remain
         anonymous for reasons of confidentiality we are aware that of the three, one filled for 100
         nights and one filled for 135 nights. A ‘fill’ night has been based on an occupancy of 90%+.
         The majority of fill nights occurs in the midweek period, particularly Tuesday and
         Wednesday. Thus, on the basis that there are some 208 working days per year (52 weeks x
         4 working days), hotels in the Kingston area can be full as much as 65% of the time. This
         means that many people trying to stay in hotels in the Kingston area will be disappointed and
         will have to seek accommodation further afield.

5.9      We understand that much of the expected future corporate demand should come from the
         firms based in the greater Surrey area, outside Kingston. We understand this is partly the
         result of higher land prices in Kingston and the low future office supply pipeline, resulting in
         new companies to the area targeting areas where development land is larger and more
         flexible. Examples include the developments at Brooklands Heights and Horizon Business
         Park in Weybridge where corporate demand is generally expected to grow over the next few
         years.

5.10     Following a series of corporate demand interviews (see Appendix D and F) we were able to
         ascertain that the feeling amongst local companies is that demand for hotel accommodation
         is robust, however the quality and supply of accommodation that is available is not
         commensurate. We can also support the view that car parking is essential to any new hotel
         development. From our interviews we were able to establish that companies were willing to
         pay on average between £85 and £100 for one night’s accommodation midweek and that on-
         site car parking facilities are a priority.

         Conferences

5.11     Due to its position in southwest London and its links to London and Heathrow and Gatwick,
         the area is a popular place to meet. A strong conference market has therefore developed,
         focused primarily on small to medium size non-residential conferences, eg 20 to 50
         delegates.    Most of the local hotels offer conference and meeting space, with Kingston
         Lodge and The Petersham Hotel being popular venues, albeit that they can only cater for
         groups no larger than 100. The area also has some dedicated conference and events
         centres that have larger meeting capacities and some accommodation; these include Warren
         House and The Lensbury Centre.

5.12     Given the number of international companies that are represented in business parks in the
         southwest London and Kingston area, the local hotels are ideal meeting venues for both
         day/residential meetings.      Some of the corporations do however have some conference
         facilities in-house eg Unilever’s Four Acres, but in many cases these are not adequate to



April 2007                              Demand for Hotel Accommodation in Southwest London 40
Royal Borough of Kingston upon Thames


         respond to their internal meeting demands. Also popular are the non-residential venues in
         the neighbouring areas, particularly Epsom, Sandown Park and Kempton Park racecourses
         which offer large meeting and exhibition facilities, but do not have any associated
         accommodation, although Epsom has been granted permission to build a hotel of 120
         bedrooms.

         Function and Event Demand

5.13     Kingston is at the heart of one of the country’s most affluent areas and as a result many
         organisations and individuals entertain, often on a lavish scale. This means that
         hotels/sporting locations in the area enjoy significant amounts of function demand, be it
         corporate hospitality or the celebration of a wedding or a significant anniversary. Raven’s Ait
         is a particularly popular wedding venue, but otherwise the choice is limited. The provision of
         a quality hotel in Kingston, supported by extensive function facilities could expect to do well
         with wedding receptions throughout the year and especially from spring to autumn, and
         corporate functions throughout the year, especially around Christmas and major local events
         such as The Mayor’s Ball and the Annual Kingston Chamber dinner.

         Tours & Groups

5.14     This particular source of demand is often described as being ‘on tap’ which means that
         hotels which have room availability can fill their hotel through this source albeit at rates that
         this market is willing to pay which are often substantially below those paid, for instance, by
         the corporate sector. This market often comprises coach parties travelling around the UK or
         those visiting the local area. Kingston would be an ideal base to visit the local attractions, eg
         Chessington World of Adventures, Hampton Court, Farnborough Air Show, Legoland, Wisley
         Gardens, plus due to its accessibility, it could also be a good base to explore London. This
         source of demand is mainly targeted during low corporate demand periods such as
         weekends and the months of July and August. We understand that it forms a substantial part
         of full service hotels’ business particularly during some of the aforementioned periods.

         Leisure Travellers

5.15     There is significant demand from leisure users in the area, particularly when major events
         are taking place. Assuming that the hotel under consideration is operated by an international
         hotel operator, such companies have well established ‘leisure break’ programmes and
         market these extensively using dedicated brochures and the Internet. There is now a
         tendency for people to take shorter, more frequent holidays and leisure breaks are now a
         well recognised holiday activity. With its retail offering, access to central London and the
         range of other activities in the vicinity, Kingston is an excellent short break destination.




April 2007                            Demand for Hotel Accommodation in Southwest London 41
Royal Borough of Kingston upon Thames


         Visiting Friends and Relatives (VFR)

5.16     Staying in hotels when visiting friends and relatives has become established practice. In
         Kingston’s case it is a large residential area and there would clearly be many opportunities
         for hotels to accommodate overnight visitors at weekends who were in the area to see
         friends or relatives. Kingston has a combined university/college student population of 30,000
         and therefore there will be many parents wishing to visit their children during termtime and
         other important occasions such as graduation. Thus VFR represents a significant market
         opportunity for Kingston’s hotels and for any future hotel projects such as the one under
         consideration in this report.

         Conclusion

5.17     The performance of hotels in the southwest London/Kingston area was buoyant in 2006 and
         despite the worldwide geopolitical events since 11 September 2001, the performance has
         been remarkably consistent. This underlines the fundamental strengths of the area in terms
         of its economy and attraction as a destination. In Kingston’s case the town can appeal to all
         market segments, from corporate to conference, leisure break to VFR, all of which would
         help to support the development of a quality hotel within the town.

         Optimum hotel development

5.18     We have modelled various scenarios for the room count of any proposed hotel, from 50
         rooms to 200+ rooms, and based on projected monthly performance, historic demand and
         taking into account certain site restrictions and market characteristics, we believe 150 to 200
         rooms is the optimum room count. This number of rooms should provide the most attractive
         bottom line for operators and developers creates the optimum indicative value per available
         room and meets the markets demands. Based on current operators requirements we would
                                                                                                      2
         also recommend that the minimum room size for a typical mid-market quality hotel is 25m .
         We discuss this in more detail in Section 7.10.

         Hotel Operators’ Views

5.19     We have discussed the potential for the development of a quality hotel in Kingston with a
         number of hotel operators/developers as shown in Appendix D. In summary their views are
         shown below:

             It is recognised that Kingston lacks quality hotel provision;

             Any quality hotel development should be located in the town centre within easy access
             of the retail offering and river frontage if possible;

             Kingston is a good base to explore both London and the Surrey countryside as well as
             when attending the many major events that take place in the area;



April 2007                               Demand for Hotel Accommodation in Southwest London 42
Royal Borough of Kingston upon Thames


             The market conditions in Kingston area favourable due to the strength of the local
             economy and its strategic location;

             There may be some concern with the strength of the individual corporate market
             midweek, however this could be compensated by effective selling to local companies
             and conference bookings;

             In the latter regard Kingston is an excellent meeting venue outside London given its
             communication links;

             There was some concern about viability due to potentially greater than average
             development costs.

5.20     The above views demonstrate the development of a quality hotel in Kingston is supported by
         hotel operators/developers. This is further evidenced by the fact that planning applications
         for quality hotels in Kingston have been submitted in the past, but for a variety of reasons,
         none has proceeded. Given the current positive environment for the operation of hotels in
         London, it would seem an opportune moment to be marketing the potential for hotel
         development in Kingston to the major international hotel operators.




April 2007                          Demand for Hotel Accommodation in Southwest London 43
Royal Borough of Kingston upon Thames



6        Site Analysis of Vicarage Road & Bishop’s
         Palace
         Introduction

6.1      The Council has identified that they wish to see a hotel developed to support the town
         centre. Based on our analysis and supported by the views of operators as discussed in the
         foregoing section, we agree that Kingston town centre would justify a hotel being developed
         there, provided of course that the project was commercially and financially feasible. This will
         strongly depend on the commercial terms to be offered by the landlord/owner and on the
         likely construction costs of the hotel. We comment in Section Eight on the likely financial
         performance of the hotel, assuming a quality hotel positioning performing in line with other
         hotels in the southwest London area.

         Hotel Sites under Review

6.2      The local plan for the town indicates one potential site (the Power station site – PS1) and a
         further three sites have been identified for potential hotel development at Vicarage Road,
         EDF Sub-station and Bishop’s Palace. All the sites are illustrated in Figure 6.1.

6.3      The purpose of this section is to assess the suitability of each of the identified sites for
         potential hotel development. To enable us to do this we have created a ‘grading matrix’ in
         order to analyse the characteristics of each site under the key criteria of Economic (20% of
         total), Infrastructure (40%) and Market (40%). Each of the key criteria has been sub-divided
         into secondary criteria against which a weighting factor has been applied. It should be noted
         that inevitably the assessment is subjective, although we have tried to be as objective as
         possible, and there is less than half a mile between the sites so in a number of instances the
         scores are identical. However, there are nuances in each case which has helped our
         assessment of the sites. The grading matrix used showing all the various criteria and
         weighting factors is presented in Appendix H. For the purposes of brevity in the following
         sections the ‘headline’ results under the key criteria have been reported. It should be noted
         that the scores area based on a scale of one to five, one being poor and five being excellent
         for each of the assessment criteria. The grading matrix results are summarised in Appendix
         I.

6.4      We subsequently discuss each site in terms of its strengths and weaknesses for the
         development of a proposed hotel.

6.5      NHP Leisure (NHP) has submitted a formal planning application for the combined PS1 and
         EDF sub-station sites. We have reviewed this and included our comments regarding this
         specific application in Section Seven.



April 2007                                   Site Analysis of Vicarage Road & Bishop’s Palace 44
Royal Borough of Kingston upon Thames


6.6      Figure 6.1 - Aerial view of proposed hotel sites in Kingston



                               PS1




                                        EDF site




                    Island site      Vicarage
                                     Road




             Bishop’s Palace




         Vicarage Road/Wood Street

         Site Description

6.7      This site is located between John Lewis department store and the Bentalls Centre multi-
         storey car park B. The hotel site occupies the eastern portion of the island site and is
         currently vacant land being used as a temporary car park. The western portion of the site is
         owned by Fenwicks.

6.8      Owned by NHP, planning applications were submitted for the eastern site in 2005 for a 150-
         bedroom hotel to be built on nine storeys, including conference and banquet facilities, food
         and beverage facilities and a health and leisure suite. The application was withdrawn in
         2006. We understand that the lack of associated car parking provision, as part of the hotel
         application, resulted in a number of objections from major retailers concerned about the
         impact of the hotel on existing parking capacity.




April 2007                                         Site Analysis of Vicarage Road & Bishop’s Palace 45
Royal Borough of Kingston upon Thames


6.9      The hotel site fronts onto Wood Street, which links Kingston Bridge with the town’s one-way
         system. Vicarage Road and Water Lane, which are perpendicular to Wood Street, provide
         access only to the John Lewis delivery/collection bay, the Bentalls Centre car park and
         Thames riverfront.

6.10     The site is highly visible and development on this site would help to fill an unsightly gap
         between Bentalls car park and John Lewis. We understand it is Morley Fund’s plan to rebuild
         the adjacent car park, Bentalls Car Park B, which has been closed for the past two years as
         there are structural problems. Planning permission was granted in 2004 for the demolition
         and rebuilding of this building.

6.11     Figures 6.1 and 6.2 illustrate the island site’s location. The view in Figure 6.2 is east-facing
         from the Thames riverbank.

Figure 6.2 - Photo of Vicarage Road/Wood Street site




                                       Hotel site




         Results of Grading Matrix Analysis

6.12     The results of the grading matrix analysis are summarised in the following table:

                                    Site - Vicarage Road
                                    Assessment       Weighting    Score
                                    Economic               20%      3.17
                                    Infrastructure         40%      3.35
                                    Market                 40%      3.48
                                    Total                  100%     3.37




April 2007                                      Site Analysis of Vicarage Road & Bishop’s Palace 46
Royal Borough of Kingston upon Thames


6.13     According to our assessment per the grading matrix, the Vicarage Road site outperforms the
         other sites from an economic and infrastructure perspective. The particular point in its favour
         under the economic criterion is its proximity to the main retail areas as it is adjacent to John
         Lewis and a short walking distance to the main shopping areas in the town centre. From an
         infrastructure standpoint it outperforms the other sites because of its direct ring road access
         and the proximity of car parking.

6.14     The only real drawback from our analysis is the ‘tightness’ of the site which may constrain
         the facilities that could be included in the property, in particular, dedicated car parking and
         meeting facilities and hence the potential market positioning of the hotel.

         Issues

6.15     If agreement could be reached between the two island site owners, we would recommend
         that the hotel site be extended across the whole site, ideally for it to carry down to the
         riverfront. This would not only allow the provision of adequate car parking, it would also fully
         utilise unoccupied space meaning the hotel’s massing could be decreased and the provision
         of facilities within any proposed hotel could also be enhanced, particularly the conference
         and banqueting facilities.

6.16     If the marriage of the two sites were not possible, we would still recommend the Vicarage
         Road (eastern site) site as the preferred hotel development opportunity in Kingston. A
         scheme has already been prepared for this site and it was probably disappointing the project
         did not proceed due to the lack of car parking.

6.17     This site is the preferred option of the four as it is the most centrally located in Kingston town
         centre. Any development on the Vicarage Road site would have excellent visibility from all
         passing traffic and footfall and it would be in close proximity to a significant proportion of car
         parking provision. Of particular importance if none were to be provided on-site.

6.18     The location of the site might allow a potential developer the opportunity to include some
         commercial (A3) space on the ground floor. As we have demonstrated demand for retail
         space is high and having this revenue stream included in the development would assist in
         minimising the investment risks, through a more diversified revenue stream, eg hotel and
         retail rents. Alternatively consideration could be given to having a car park at ground floor
         level. If it could accommodate say 60 cars and the hotel had 120 rooms that would be a ratio
         of 1:2 car park spaces to bedrooms. This would probably be sufficient for the hotel’s
         purposes. The main periods of demand for hotel car parks are overnight and midweek during
         the day, especially if the hotel has conference and meeting facilities and delegates are
         attending day conferences. These are times when there is less pressure on the car parks in
         Kingston as demand for these is at its peak at the weekends and other peak periods. In our
         view therefore car park demand from hotel guests differs from car park demand from




April 2007                                    Site Analysis of Vicarage Road & Bishop’s Palace 47
    Royal Borough of Kingston upon Thames


             shoppers and to some extent their needs are complementary and can in fact create new
             periods of demand for a car park, ie overnight use.

6.19         In the table below we highlight the strengths, weaknesses, opportunities and threats of the
             hotel site.

Strengths                                                           Weaknesses

•     Located close to railway and bus stations                     •   Small site available and therefore to gain critical mass in
                                                                        terms of the number of hotel rooms any proposed
•     Located in the town centre, close to many of the town’s           development would need to be built up on a number of
      facilities especially the retail areas                            storeys
•     Located within Kingston’s main restaurant and bar hub         •   Congestion around the Bentalls Centre car park can be
                                                                        significant during peak periods


Opportunities                                                       Threats

•     Rejuvenation of a derelict site to a landmark building in     •   Car parking would need to be provided so as not to over-
      the heart of Kingston town centre and close to the town’s         impact the provision available to adjacent retail
      leisure and retail hub                                            stakeholders
•     Opportunity to develop a substantially larger hotel if the    •   Close to many of Kingston’s bars and restaurants which
      adjacent vacant site could be incorporated into the               could compete with any food and beverage outlets within
      scheme                                                            the hotel
•     Possibility of incorporating some ground floor retail units
      or car park
Source: PKF research




             Bishop’s Palace House

             Site Description

6.20         This ‘squat’ dark red-brick building was redeveloped in the 1970s and comprises ground
             floor retail, offices, public house, nightclub, restaurant and public car parking (70 spaces).

6.21         This site is immediately south of Kingston Bridge and fronts the eastern riverside and as
             such is in a prime position in Kingston. The only access is via Clarence Street from Horse
             Fair. All other access routes via the market place are restricted or have been pedestrianised.
             The site is located within Kingston’s pedestrianised area and therefore increases the
             difficulty of accessibility by car borne demand.

6.22         A redevelopment of Bishop’s Palace House would have strong visibility from all traffic
             passing across Kingston Bridge, heading east. However, depending upon the location of the
             hotel within any larger redevelopment, it could also be visible by traffic heading west. Figure
             6.1 and 6.3 illustrates the location of Bishop’s Palace House.




April 2007                                                 Site Analysis of Vicarage Road & Bishop’s Palace 48
Royal Borough of Kingston upon Thames


Figure 6.3 - Photo of Bishop’s Palace House



                                            Bishop’s Palace House




         Results of Grading Matrix Analysis

6.23     The results of the grading matrix analysis are summarised in the following table:

                                    Site - Bishop’s Palace House
                                    Assessment       Weighting     Score
                                    Economic              20%        3.03
                                    Infrastructure        40%        2.60
                                    Market                40%        3.58
                                    Total                100%        3.08




6.24     The Bishop’s Palace site, despite its excellent river frontage, underperforms the other sites
         principally under the infrastructure criterion in that it is the furthest from the railway station.
         Otherwise the site compares favourably with the other sites, however, there is an issue with
         the site from a development standpoint which is described below.

         Issues

6.25     This is a large site that could easily accommodate a substantial hotel development. It offers
         excellent visibility, is in a landmark position at the eastern end of Kingston Bridge and enjoys
         uninterrupted river frontage. However, the main issue associated with this site would be the
         development cost of the hotel. It is unlikely (from our lay perspective) that the existing
         buildings could be converted into a hotel, therefore necessitating demolition and re-building.



April 2007                                      Site Analysis of Vicarage Road & Bishop’s Palace 49
    Royal Borough of Kingston upon Thames


             In our experience most hotel conversions are of former office buildings built on a modular
             structure which are then converted to hotels, usually limited service. The clear intention is to
             develop a quality hotel so such a conversion would not be appropriate. Were the existing
             buildings to be demolished there is no doubt that an excellent hotel could be developed at
             the site, but the costs of such development could be very significant to include the
             demolition, potentially rendering the project unfeasible.

6.26         Consideration could be given to a mixed-use scheme of which the hotel could be one of the
             components. A mixture of say hotel, office or residential and retail could work well, providing
             prime retail space, Grade A office space (of which there is none in Kingston) or high quality
             residential accommodation and a quality hotel.

6.27         In the following table we highlight the strengths, weaknesses, opportunities and threats of
             the hotel site.

Strengths                                                         Weaknesses

•     Riverfrontage                                               •   Access is via Kingston Bridge only
•     Unimpeded views of the River Thames and Hampton             •   Kingston Bridge and the one-way system can become
      Court Park                                                      congested during peak periods making access to the site
                                                                      via car difficult
•     Large flexible site
•     Located within Kingston’s main restaurant and bar hub
Opportunities                                                     Threats

•     Significant footfall along the River Thames tow path        •   Within Old Town conservation area
•     Very close to Kingston Old Town area                        •   Could increase the congestion at the corner of Clarence
                                                                      Street and Horse Fair
•     Site offers ability to develop a landmark mixed-use
      scheme
•     Redevelopment could greatly enhance the riverfront
      façade and the gateway approach to the town centre
Source: PKF research




April 2007                                                  Site Analysis of Vicarage Road & Bishop’s Palace 50
Royal Borough of Kingston upon Thames



7        Former Power Station & EDF site planning
         application review
         Introduction

7.1      The former Power Station site has been vacant since the power station’s demolition in 1990.
         NHP bought the site from Powergen and submitted proposals for a hotel in 1999. Following
         interest from operators and tenders submitted, it was decided that the development costs
         were too high to justify the development. NHP has now revised the scheme and in addition
         NHP has acquired the adjacent EDF site in order to develop a hotel as part of their mixed-
         use development scheme and in-order to conform to Kingston’s UDP. The site occupies a
                                                                                  2
         1.42 hectare site, of which the hotel occupies a footprint area of 7,892m .

7.2      Appendix C includes some detailed plans from NHP’s application.

7.3      NHP’s vision for the Power Station site is for a 15-storey building (including ground floor)
         comprising 243 flats, a proportion of which would be affordable housing. The plans for the
         EDF site are to develop an eight-storey building (including ground floor) that would enclose
         the existing sub-station. This development would include 146 flats and a 150-bedroom hotel
         with associated conference, banqueting and meeting facilities. The Power Station site would
         provide 372 car parking spaces across two basement levels, of which 75 would be allocated
         to the hotel.

         Site Analysis

7.4      The Power Station site fronts onto Canbury Gardens with the Thames situated beyond,
         offering future riverside tenants excellent views. On the opposite side of the site, views from
         the lower rear-facing EDF site development and from the south-facing hotel bedrooms would
         be less attractive, as they would be overlooking the railway embankment.

7.5      The proposed hotel will occupy a site on the corner formed by Down Hall Road and Skerne
         Road. The site is unfortunately not a prominent location as its visibility is obstructed by the
         adjacent railway embankment, however it is only 100m from the rear entrance of the Bentall
         Centre. Opposite the proposed hotel on Skerne Road is a residential development known as
         Royal Quarter, and other buildings on Skerne Road include Seven Kings car park and Lok’n
         Store, a self-storage warehouse, which has planning permission and is shortly to be
         redeveloped to residential and a GP surgery.

7.6      Vehicular access to the hotel site would be via Richmond Road, Sury Basin and Henry
         Macaulay Avenue to reach the hotel’s dedicated car parking which is located beneath the
         Power Station site residential development. For disabled visitors and deliveries the entrance
         to the hotel is via Skerne Road where there is a courtyard with the hotel’s loading bay and



April 2007                      Former Power Station & EDF site planning application review 51
Royal Borough of Kingston upon Thames


         seven disabled car parking spaces. The hotel’s main entrance and drop-off/pick-up area,
         which is set back, is on Skerne Road. Vehicular access between Skerne Road and Steadfast
         Road or Down Hall Road is currently not possible. Therefore access for traffic coming over
         Kingston Bridge from the west would drive via Horsefair, Wood Street, and Kingsgate Road,
         Seven Kings Way and Sury Basin to reach Skerne Road.

7.7      In Figure 7.1 we illustrate the NHP development site plan. We have highlighted the area that
         the hotel is proposed to occupy.

7.8      The size and scale of the site allows for the provision of dedicated hotel car parking, located
         as part of the adjacent Power Station Site, which is advantageous considering the lack of
         provision in previous applications to the Council.     The ratio of parking spaces to hotel
         bedrooms is 1:2 which in today’s market is acceptable, albeit at the lower end of the scale.

Figure 7.1 - Site plan of Power Station and EDF Sub-station




                                                                         Hotel site




         Analysis of the Proposed Hotel Components

7.9      In Figure 7.2 we present a summary of the proposed hotel components:




April 2007                      Former Power Station & EDF site planning application review 52
 Royal Borough of Kingston upon Thames


Figure 7.2 - Facilities matrix

Floor      Component                              Comment

Ground     Reception/Front Office
           Restaurant
           Bar
           Kitchens/Stores
           Lobby
           Disabled parking bays Within the
           hotel courtyard off Skerne Road
           Hotel loading bay and deliveries
           access
           Staff facilities
           Cloakroom
           Toilets
           2 passenger lifts and 1 service lift

First      4 Meeting rooms                        Large meeting rooms. 3@43m2 and 1@66m2
           1 Conference & Banqueting Suite        340m2 of conference space, non-divisible
           Office                                 Administration offices
           Hotel Plant and CHP                    Plant machinery

Second     21 Bedrooms                            Single loaded corridor with bedrooms of
                                                  approximately 22m2
           Back of House                          Stores and administration offices

Third      21 Bedrooms                            Single loaded corridor with bedrooms of
                                                  approximately 22m2
           Stores/cleaning cupboards

Fourth     29 Bedrooms                            Double loaded corridor with bedrooms of
                                                  approximately 22m2
           Stores/cleaning cupboards

Fifth      29 Bedrooms                            Double loaded corridor with bedrooms of
                                                  approximately 22m2
           Stores/cleaning cupboards

Sixth      29 Bedrooms                            Double loaded corridor with bedrooms of
                                                  approximately 22m2
           Stores/cleaning cupboards

Seventh    29 Bedrooms                            Double loaded corridor with bedrooms of
                                                  approximately 22m2
           Stores/cleaning cupboards

Total      150 bedrooms

Source: NHP Leisure Developments Ltd




April 2007                               Former Power Station & EDF site planning application review 53
Royal Borough of Kingston upon Thames


7.10     We comment as follows:

             Pedestrian access to the hotel from the car park – As far as we can tell, there is no
             direct pedestrian access from the car park to the hotel and guests have to enter the
             hotel via Down Hall Road and there is no covered walkway which could cause some
             guest dissatisfaction in inclement weather.

             Per our demand section, we expect the hotel to receive a proportion of tour/group
             demand throughout the year. We would expect these guests to arrive on
             coaches/buses. In the current plans it is not evident that there is any provision for coach
             parking bays. The planning statement makes reference to coaches ‘only accessing on
             Down Hall Road’.

             Disabled access to the hotel from disabled parking – There are seven disabled car
             parking spaces in the hotel’s inner courtyard, three of which are dedicated to the hotel’s
             use and four for the residents of the flats. It would appear that disabled guests would
             have to leave their vehicles in the disabled parking bays and then make their way to the
             main hotel entrance on Skerne Road. The plans do not show how this would be
             achieved and it appears that the journey could be relatively arduous due to kerbs.

             Ground Floor – The Ground Floor comprises the hotel’s public areas with the exception
             of the conference and meeting facilities. While the area is quite ‘tight’ it is reasonably
             well organised with the Front Office located behind Reception and the bar, restaurant
             and kitchen located adjacent to each other. The restaurant is quite small with 64 covers
             shown in the plans. On a midweek day (especially Tuesday or Wednesday) the hotel
             could expect to be full, largely with single room occupancy which would imply
             approximately 140 resident guests assuming a room occupancy of 95%. While guests
             do not all eat their breakfast at the same time and some may choose room service, it is
             likely that the majority would eat their breakfast between 7.30 and 8.30 am so there may
             be some difficulty accommodating demand in between those times. There is a very
             large cloakroom on the ground floor which appears a substantial use of space and could
             possibly be reduced or relocated to the floor above where the main conference and
             meeting rooms are located and which require cloakroom provision.

             First Floor – The First Floor is dedicated to meetings/function space with four meeting
                              2              2                                                 2
             rooms (3 x 43m and 1 x 66m ) and a large meeting/function room of 340m . All the
             meeting rooms have access to natural daylight which is a major advantage. The four
             smaller meeting rooms will provide good meeting space (per the British Association of
             Conference Destinations (BACD) the average number of delegates attending meetings
             is 49) and could also be used for private dinners, receptions etc. The main function
             space could accommodate approximately 470 delegates theatre-style (on the basis of
                   2                                                                       2
             0.72m per delegate) and 280 diners banquet-style (on the basis of 1.2m per diner).



April 2007                        Former Power Station & EDF site planning application review 54
Royal Borough of Kingston upon Thames


             The only issue we have is that the large space is not sub-divisible which would provide
             the hotel operator with greater flexibility leading to more efficient use of the space.

             Bedroom Floors 2-4 – These floors are single-loaded with 21 rooms on each floor. The
             floors overlook Down Hall Road and the railway embankment so the views will not be
                                                                                          2
             particularly attractive. Most of the rooms are approximately 22m which is small for a
             quality hotel and does not meet current operator requirements. For such a hotel we
                                         2
             would expect to 26-28m , as suggested by the cost consultants EC Harris per the table
             below.

                         Indicative area per key
                         Hotel                      Gross area/key   Nett area/key
                                                       2
                         Luxury                     75m upwards      35m2 upwards
                         Mid-market                 55-65m2          26m2-28m2
                         Budget                     32m2             20m2
                         Source: EC Harris




             Bedroom Floors 5-7 – These floors are double loaded with 29 rooms on each floor. The
             south facing bedrooms again overlook the railway embankment, albeit from a higher
             perspective and therefore should also command some views across Kingston town
             centre.   The       north   facing    bedrooms     on   these       floors       overlook   the   roof
             gardens/landscaping that encases the sub-station. Possible river views possible from
             these bedrooms however would be obstructed by the proposed residential units on the
             PS1 site. The rooms are of a similar size to those on floors 2-4.

             The hotel has no provision of health & fitness facilities. These would be of benefit to
             hotel guests and residents; however this proposed hotel site is in close proximity to two
             large branded fitness facilities within Kingston, ie David Lloyd Leisure at The Rotunda
             and Esporta adjacent to Sainsbury’s off Richmond Road. We would therefore
             recommend that the hotel operator negotiates a small number of memberships with the
             clubs so that guests wishing to use health and fitness facilities could do so free of
             charge.

         Results of Grading Matrix Analysis

7.11     As per Section 6 we have undertaken similar site analyses for the EDF site using the grading
         matrix approach. The results of the grading matrix analysis for both the EDF Sub-Station and
         PS1 site are summarised in the following table:




April 2007                         Former Power Station & EDF site planning application review 55
    Royal Borough of Kingston upon Thames


                         Site - PS1                                    Site - EDF Site
                         Assessment        Weighting        Score      Assessment           Weighting       Score
                         Economic                   20%         3.02   Economic                     20%         3.02
                         Infrastructure             40%         2.65   Infrastructure               40%         2.95
                         Market                     40%         3.54   Market                       40%         3.27
                         Total                   100%           3.08   Total                       100%         3.09




7.12         In the table below we highlight the strengths, weaknesses, opportunities and threats of the
             hotel site.

Strengths                                                              Weaknesses

•     Prominent corner site                                            •       No river frontage
•     Located close to Kingston’s railway and bus stations             •       Many of the hotel bedrooms would have limited views
•     Located in the town centre, close to many of the town’s          •       Access is slightly convoluted via Richmond Road
      facilities
•     Close to Kingston’s main restaurant and bar hub
•     Part of a larger redevelopment of the entire North
      Kingston area
Opportunities                                                          Threats

•     Close to Kingston’s retail and leisure hubs                      •       EDF site is still in operation (sub-station)
•     Potential to become the first quality hotel in Kingston
      town centre
Source: PKF research




             Conclusion

7.13         The results of the grading matrix analysis are summarised in Figure 7.3 below.

                Figure 7.3 - Summary of grading matrix scores
                                                    PS1             EDF           Bishop’s Palace         Vicarage Road
                                                                                  House
                Assessment          Weighting       Score           Score                       Score     Score
                Economic                  20%             3.02            3.02                     3.03                 3.17
                Infrastructure            40%             2.65            2.95                     2.60                 3.35
                Market                    40%             3.54            3.27                     3.58                 3.48
                Total                     100%            3.08            3.09                     3.08                 3.37




7.14         While the results indicate that a hotel development on the Vicarage Road site would be the
             preferred option, it is our view that the proposed hotel on the EDF site should be
             encouraged. It is a real proposal and would provide Kingston with a quality hotel with 150
             bedrooms, dedicated car parking and good conference and banqueting facilities. The key
                                                     2
             issue is that we believe 22m bedrooms, which are also very long and narrow, does not
             conform to current operators’ brand standards for quality hotels and would act as a



April 2007                                 Former Power Station & EDF site planning application review 56
Royal Borough of Kingston upon Thames


         disincentive. Operators advised us that they were reluctant to wrap their hotel around the
         sub station and that the resulting long corridors and unconventional floor plans were also not
         conducive to their typical builds.

7.15     Although the EDF site is slightly less favourable than Vicarage Road, the hotel will occupy a
         prominent position in a redeveloped location which should transform the area’s current
         somewhat unattractive appearance, dominated as it is by the sub-station.

7.16     We would also imagine a hotel as part of a mixed-use scheme at the Bishop’s Palace site,
         but question its potential feasibility due to the cost of redevelopment. On balance therefore
         we favour the EDF site hotel development and consider the hotel market conditions in
         Kingston propitious to support such a project.




April 2007                       Former Power Station & EDF site planning application review 57
Royal Borough of Kingston upon Thames



8        Commercial Viability
         Introduction

8.1      PKF has been asked to comment on the potential commercial viability of a quality hotel in
         Kingston town centre. To enable us to do so we have made reference to our database which
         tracks the operational performance of a large number of hotels in London and the UK.
         Equally PKF undertakes a significant number of hotel valuations each year and also records
         transactions that have taken place in the UK hotel market (including London) so that we
         have current knowledge of the hotel transaction market.

         Hypothetical Operating Performance

8.2      For the purposes of demonstrating the potential commercial viability we have made the
         following assumptions:

             A quality hotel with 150 rooms supported by an all-day food and beverage outlet and
             meeting and function facilities;

             The hotel is operated by a major international hotel chain;

             In a stabilised year and in current values the hotel achieves an average annual room
             occupancy of 75% in line with the recent market performance, at an average room rate
             (ARR) of £85.00 net of VAT.

8.3      On the basis of the above assumptions we have prepared a hypothetical profit & loss
         account for the hotel shown below:

                    Hypothetical quality hotel, Kingston upon Thames

                    Number of days                                          365
                    Available rooms                                         150
                    Total available rooms per annum                      54,750
                    Total occupied rooms per annum                       41,063

                    Occupancy (%)                                         75.0%
                    AARR (£)                                              85.00
                    Rooms yield (£)                                       63.75

                    Rooms revenue (£)                                  3,490,313
                    as a % of total rooms revenue                65%

                    Total revenue (£)                                  5,369,712

                    EBITDA (£)                                         1,879,399
                    as a % of total rooms revenue                35%

                    Source: PKF




April 2007                                                                         Commercial Viability 58
Royal Borough of Kingston upon Thames


         Notional Valuation

8.4      In our experience hotel properties in the UK (not trophy or central London hotels) have in the
         recent past been changing hands at earnings multiples in the order of 10 to 15 times
         EBITDA (earnings before interest, tax, depreciation and amortisation). In this example the
         hypothetical EBITDA achieved by the hotel is £1.9m. Applying an earnings multiple on 12
         (on a prudently conservative basis) results in a notional value of £22.6m, or £150,000
         (roundly) per room. Per research published by Knight Frank in 2005, the estimated cost of
         building a mid-market hotel (including fees and fixtures, fittings and equipment – FF&E), is in
         the order of £114,000 per room (excluding land). Conversations we have had with operators
         during the course of the assignment indicated building costs on the same basis for a four-
         star hotel at approximately £135,000 per room.

8.5      In this example it would seem therefore, that the earnings produced by the hotel would cover
         the development costs of the property and therefore encourage a developer to proceed with
         the project.




April 2007                                                                  Commercial Viability 59
Royal Borough of Kingston upon Thames



Appendix A - Kingston’s Areas for Change




April 2007                              Appendix A - Kingston’s Areas for Change 60
Royal Borough of Kingston upon Thames


Appendix B - Kingston’s Road Network




April 2007                              Appendix B - Kingston’s Road Network 61
Royal Borough of Kingston upon Thames



Appendix C - NHP’s PS1 and EDF Site Plans
Down Hall road elevation of NHP’s proposed development of the Power Station and EDF site




April 2007                                                                                 Appendix C - NHP’s PS1 and EDF Site Plans 62
Royal Borough of Kingston upon Thames




April 2007                              Appendix C - NHP’s PS1 and EDF Site Plans 63
Royal Borough of Kingston upon Thames




April 2007                              Appendix C - NHP’s PS1 and EDF Site Plans 64
Royal Borough of Kingston upon Thames




April 2007                              Appendix C - NHP’s PS1 and EDF Site Plans 65
Royal Borough of Kingston upon Thames




April 2007                              Appendix C - NHP’s PS1 and EDF Site Plans 66
Royal Borough of Kingston upon Thames




April 2007                              Appendix C - NHP’s PS1 and EDF Site Plans 67
Royal Borough of Kingston upon Thames




April 2007                              Appendix C - NHP’s PS1 and EDF Site Plans 68
 Royal Borough of Kingston upon Thames



Appendix D - Contacts
Clients

Contact               Company
Roy Thompson          RBK
Pat Loxton            RBK

The key stakeholders that we interviewed include:

Contact                     Company
Paul Drummond               RBK
John Mumford                RBK
Lucie Moore                 RBK
Jamie Talmage               Visit London
Lisa Gagliani               Kingston Chamber of Commerce
Bob Cattaneo                Cattaneo Commercial
Paul Buzasi                 Hotel Antoinette
Robert Nipper               Hilton Cobham
David Pratt                 Kingston Lodge
Sandra Peers                White Hart
Deirdre Ferrier             Kingston university
Richard Jewitt              Cusco
Development Director        Golden Tulip
Development Director        BDL Management (Hotel
                            operator/developer)
Financial Director          Brook Hotels
Development Director        Marriott International
Development Director        Hilton International




Companies that responded to our corporate demand questionnaire:

Nestle Purina Petcare (UK) Ltd       Walters Kluver
MBI incorporated                     WK Thomas & Co
Nikon                                John Artis Glassworks
SITEL International                  Gallup Organisation
Callaway Golf Europe                 London General Holdings
DST International                    The Tussauds Group
Thales Telemetrics PLC               Samsung
Air Charter Service Plc              Unilever
Fine Foods International Ltd
Datacode Systems




April 2007                                                        Appendix D - Contacts 69
Royal Borough of Kingston upon Thames



Appendix E - Definition of Hotel Classification
         Hotels, B & B’s and Guest Accommodation Inspection Schemes

In response to consumer demand, the Automobile Association (AA), English Tourism Council (ETC)
and the RAC have joined forces to create one new overall rating scheme for serviced accommodation,
using Stars to represent hotels and Diamonds for Guest Accommodation (guesthouses, inns,
farmhouses, bed & breakfast). The new scheme puts greater emphasis on quality in hotels and guest
accommodation, particularly in areas of cleanliness and guest care.

         Serviced Accommodation: Stars (AA, ETC, RAC)

Star ratings symbolise the level of service, range of facilities and quality of guest care that you can
expect. Hotels are required to meet progressively higher standards as they move up the scale from
one to five Stars. The gradings are:

     One Star: Practical accommodation with a limited range of facilities and services, but a high
     standard of cleanliness throughout. Restaurant/eating area. 75% of bedrooms will have en-suite
     or private facilities.

     Two Stars: Better equipped bedrooms, all with en-suite/private bathroom and a colour TV. A lift
     is normally available.

     Three Stars: High standard of services and facilities, including larger public areas and
     bedrooms, a receptionist, room service and laundry.

     Four Stars: Accommodation offering superior comfort and quality; all bedrooms with en-suite
     bath, fitted overhead shower and WC. Spacious well appointed public areas. More emphasis on
     food and drink. Room service of all meals and 24 hour drinks, refreshments and snacks. Dry
     cleaning service available. Excellent customer service.

     Five Stars: A spacious, luxurious establishment offering you the highest international quality of
     accommodation, facilities, services and cuisine. There will be a range of extra facilities. You will
     feel very well cared for by professional attentive staff providing flawless guest services.




April 2007                                        Appendix E - Definition of Hotel Classification 70
Royal Borough of Kingston upon Thames



Appendix F- Corporate Demand Questionnaire
                                 Kingston upon Thames
It is intended to develop a hotel in Kingston. Working on behalf of the council to research the hotel
market, we are seeking the views of leading Kingston companies as to the viability of this project.




Name:                                                      Position:

Company:                                                   Telephone number:


Location:                                                  Number of employees:

Date:                                                      Interviewed by:




Question 1.      Does your company ever make use of hotel accommodation in or around Kingston,
                 for example for visiting clients or employees from other offices?       YES
                 / NO

Question 2.      If so, how many room nights would you estimate you use on average (ie how many
                 individual room bookings and for how many nights)?                per week / month /
                 year


Question 3.      What is the usual budget for accommodation?


                 Does this include VAT / Breakfast / Lunch / Dinner


Question 4.      Which hotels do you currently tend to use most? Please give examples




Question 5.      Why?            Have guaranteed corporate rate                    Location


                                 Usually offer good rate                           Product


                                 Always have rooms                                 Service


                                 Other (specify):




April 2007                                          Appendix F- Corporate Demand Questionnaire 71
Royal Borough of Kingston upon Thames


Question 6.     Are you satisfied with the range of accommodation currently available? YES / NO


Question 7.     Do you usually find accommodation is readily available when you need it?      YES
                / NO


Question 8.     Should you answer ‘no’ to the above, when are the most difficult times? MON / TUE /
                WED / THU / FRI / SAT / SUN


Question 9.     What is the average length of stay for a visitor?




Question 10.    Are you likely / interested in booking accommodation at the proposed hotel in
                Kingston?    YES / NO


Question 11.    Do you have any other comments you would like to make?




Thank you for taking part in this research




April 2007                                      Appendix F- Corporate Demand Questionnaire 72
Royal Borough of Kingston upon Thames



Appendix G - Hotels in Northeast Surrey
Hotels included in Elmbridge, Mole Valley and Epsom & Ewell.


Elmbridge
Cedar House Hotel, Cobham
Moorland Lodge, Cobham
Hilton Cobham
Woodlands Park, Cobham
The Bear Inn, Esher
Sandown Park Lodge, Esher
Innkeeper’s Lodge, Walton-on-Thames
The Weir Hotel, Walton-on-Thames
Oatlands Park, Weybridge
The Ship Hotel, Weybridge


Mole Valley
Grange Hotel, Bookham
Russ Hill Hotel, Charlwood
Stanhill Court Hotel, Charlwood
Burford Bridge Hotel, Dorking
White Horse Hotel, Dorking
Travelodge, Dorking
Travelodge, Leatherhead
Gatton Manor Hotel and Counrty Club, Ockley


Epsom & Ewell
Chalk Lane Hotel, Epsom
Nonsuch Park Hotel, Ewell
Premier Travel Inn Epsom Central
Premier Travel Inn Epsom North
Premier Travel Inn Epsom South




April 2007                                          Appendix G - Hotels in Northeast Surrey 73
Royal Borough of Kingston upon Thames



Appendix H - Grading Matrix
Economic Assessment                                                                                            Royal Kingston

Weighting                           20%       Geographic Region:
                                              Site:

                                              Overall Rating:


                                                      EXCELLENT                      VERY GOOD                           GOOD                              FAIR                         POOR
         ATTRIBUTE                Weighting                 5                               4                               3                                2                             1
GVA growth over 3 years             10%                  > 15.0%                      14.9% - 12%                     11.9% - 10.0%                     9.9% -6.0%                      < 5.9%
Retail and leisure attraction       15%        <100m to town's main retail 100 - 200m to town's main retail 201 - 300m to town's main retail 301 - 500m to town's main retail    >500m to town's main
                                              and food and beverage outlets and food and beverage outlets and food and beverage outlets and food and beverage outlets             retail and food and
                                                                                                                                                                                   beverage outlets
Office supply                       20%        <100m from Grade A office     100 - 500m from Grade A office     < 100m from Grade B and        100 - 500m from Grade B and       No office supply within
                                                        supply                           supply                    below office supply               below office supply                  500m

Population demographics             17%       > 45% of population between     > 35% of population between      > 30% of population between      20% of population between       > 50% of population > 59
                                               ages 20 – 44 (representing      ages 20 – 44 (representing       ages 20 – 44 (representing      ages 20 – 44 (representing          years old (close to
                                                  working age group)              working age group)               working age group)              working age group)             retirement age group)



                                                                                                               10% of population > 59 years    > 30% of population > 59 years
                                                                                                                old (close to retirement age     old (close to retirement age
                                                                                                                           group)                           group)
Population growth over the last      8%                  > 7.0%                       6.9% - 5.0%                       4.9% - 3.0%                      2.9% -1.0%                     < 0.9%
census period
Business development:               14%       City or area has existing or is Existing business parks etc., Existing business parks etc., Few business parks, some No business parks, limited
                                              developing a number of only a few developments and planned developments and office and retail.                         Limited office and retail supply, no
                                              business parks, offices etc. occupancy levels are above occupancy levels are above development                 planned    and planned development.
                                              and occupancies are above 50%                                 50%                            occupancy levels in excess of
                                              70%                                                                                          70%
  •     Business parks                        (demonstrates an expanding (demonstrates a developed (developed             economy   little (developed economy which (secondary city with limited
                                              economy)                        economy but with room for appetite to grow)                  could be classified as stagnant) economic development)
                                                                              growth)
  •     Offices
  •     Retail
Prime Retail rents                  10%                  £200 +                        £121 - £199                      £71 - £120                       £41 - £70                       < £40
% change in retail rates 1991-       6%                  > 100%                       51% - 100%                        21% - 50%                        0% -20%                         < 0%
2005




April 2007                                                                                                                                                                               Appendix H - Grading Matrix 74
Royal Borough of Kingston upon Thames


INFRASTRUCTURE Assessment                                                                                               Royal Kingston

Weighting                                     40%       Geographic Region:
                                                        Site:

                                                        Overall Rating:


                                                            EXCELLENT                     VERY GOOD                             GOOD                              FAIR                          POOR
                ATTRIBUTE                   Weighting               5                             4                                3                                2                              1
Road:                                         30%           Close to multiple            Close to Motorway          Close to multiple Motorway        Close to A roads and B roads       Poor road access only
                                                                Motorway          junctions/interchanges, A roads junctions, A roads and B roads                                       limited A roads mainly B
                                                        junctions/interchanges, A           and B roads                                                                                          roads
                                                           roads and B roads
Rail:                                         20%                <200m                       200 - 300m                     300 - 400m                         400 - 500m                       >500m
Airport:                                       5%               0 - 5 miles                  6 -10 miles                     11 - 15 miles                    16 - 20 miles                    >20 miles

Parking                                       20%        1,000+ spaces within       500-999 spaces within 150m        250-499 spaces within 150m       1-249 spaces within 150m         0 spaces within 150m
                                                                 150m
On-site car parking potentially available     10%       Large site with excellent     Very good size site with        Good size site with excellent    Fair size site with excellent      poor size site with
                                                          potential for on-site     excellent potential for on-site   potential for on-site parking    potential for on-site parking   excellent potential for on-
                                                                parking                        parking                                                                                        site parking
Ringroad access                               10%         Excellent ring road       Very good ring road access          Good ring road access             Fair ring road access         Poor ring road access
                                                                 access
Distance to town centre                        5%       Excellent access to town     Very good access to town         Good access to town centre       Fair access to town centre        Poor access to town
                                                                 centre                       centre                                                                                           centre




April 2007                                                                                                                                                              Appendix H - Grading Matrix 75
Royal Borough of Kingston upon Thames


MARKET Assessment                                                                                                   Royal Kingston

Weighting                   40%       Geographic Region:
                                      Site:
                                      Overall Rating


                                                EXCELLENT                        VERY GOOD                            GOOD                                      FAIR                                     POOR
ATTRIBUTE                 Weighting                     5                                4                               3                                        2                                         1
Number of Hotels            14%                   Less than 10                        10 - 15                          16 - 20                                 21 - 25                                     25+
Hotel Development           14%       No hotel developments but          Some hotel developments <500 Hotel developments between Hotel developments between 1,501 – 2,500                      Hotel developments
Pipeline:                             good economic prospects            rooms, good economic         501 – 1,500 rooms, fair    rooms, fair economic prospects                                between > 2,500 rooms,
                                                                         prospects                    economic prospects                                                                       fair economic prospects


Project site visibility     15%           Frontage on major road               Frontage on main            Good visibility to pedestrians No visibility due to adjacent buildings/structures        No visibility due to
                                           interchange/junction             road/interchange/junction                   only                                                                             adjacent
                                                                                                                                                                                                   buildings/structures
Sixe of site                 6%               Excellent size of site          Very good size of site             Good size of site                         Fair size of site                        Poor size of site
Tourism:                    12%       Top international and national     National and limited              National business and         National business or leisure destination (only        No leisure or business
                                      business and leisure               international business and        leisure destination           one reason to visit)                                  appeal.
                                      destination.                       leisure destination.

Conference/Exhibition       15%       Regional Conference/            A number of city/town centre         Dedicated conference hotels Reliant on local hotels to provide meeting              None
centres                               Exhibition centres, a number of venues as well as hotel              and residential conference  rooms.
                                      city/town centre venues as well conference room provision.           centres
                                      as hotel conference room
                                      provision.

                                      (demonstrates city is able to      (demonstrates city is able to     (city or destination only     (city or destination attracts events but only         (city or destination has no
                                      attract demand from both           attract demand from national      attracts national events )    infrequently, mostly small meetings)                  conference facilities due to
                                      international and national arena   and limited international arena –                                                                                     lack of demand)
                                      – hosts large number of events)    hosts a number of events)



Riverfront aspect           12%       Excellent riverfront aspect          Very good riverfront aspect     Good riverfront aspect                       Fair riverfront aspect                 Poor riverfront aspect

Sporting venues             12%       A number of sporting venues        Sporting venues that host only    Limited sporting venues only Limited sporting venues only attracting local          None
                                      that host international and        sporting national events that     attracting local events,     events, limited overnight demand.
                                      national sporting events, ie       generate overnight demand.        limited overnight demand.
                                      Football, Rugby, Cricket etc
                                      that generate overnight
                                      demand.

                                      Regular events                     Regular national events,          Infrequent national events,   Only local events
                                                                         infrequent international events   mainly local events




April 2007                                                                                                                                                                                 Appendix H - Grading Matrix 76
Royal Borough of Kingston upon Thames



Appendix I - Grading Matrix Scores
                                                                           Vicarage   Bishop's
             Location                                  PS1      EDF Site     Road      Palace


 Economic Assessment                            20%

             GVA Growth                         10%     2          2          2          2
             Retail & leisure attraction        15%     4          4          5          5
             Office supply                      20%     2          2          2          1
             Pop Demographics                   17%     4          4          4          4
             Pop Growth                          8%     3          3          3          3
             Business dev.                      14%     2          2          2          2
             Retail rents                       10%     5          5          5          5
             Change in rents                     6%     2          2          2          3

             Total                              100%   3.02       3.02       3.17       3.03

 Infrastructure Assessment                      40%

             Road                               30%     2          2          3          2
             Rail                               20%     2          2          2          1
             Airport                             5%     2          3          4          4
             Car parking                        20%     4          5          5          4
             Car parking availability on site   10%     4          4          2          3
             Ring road access                   10%     3          3          5          3
             Distance to town centre             5%     1          2          3          4

             Total                              100%   2.65       2.95       3.35       2.60

 Market Assessment                              40%


             Nos. of Hotels                     14%     5          5          5          5
             Pipeline                           14%     4          4          4          4
             Project site visibility            15%     2          3          4          4
             Size of site                        6%     4          3          2          4
             Tourism                            12%     3          3          3          3
             Conference/Exhibition              15%     2          2          2          2
             Riverfront aspect                  12%     5          2          3          4
             Sporting venues                    12%     4          4          4          4

             Total                              100%   3.54       3.27       3.48       3.58


 Overall Rating                                 100%   3.08       3.09       3.37       3.08

 Ranking                                                3          2          1          4
 Source: PKF




April 2007                                                    Appendix I - Grading Matrix Scores 77

				
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