DEVELOPER USES EXCESS WELLINGTON OFFICE SPACE TO CAPITALISE ON GROWING VISITORS.
Developer uses excess Wellington office space to capitalise on growing visitors
HAMISH RUTHERFORD - STUFF
A Wellington property developer is using the problem of falling office demand to help fill the shortage of hotel space.
Alex Cassels, the son of Wellington Company director Ian, is refitting an office building spanning Lambton Quay and The Terrace into a 137 room hotel.
Due to open around August 10 under its own Park Hotel brand, the project is set to cost about $8.5 million.
However Cassels said the refit will cost much less than it would to develop a new hotel, which even in an environment of record visitor numbers and a buoyant economy, is still not economic in Wellington city.
"Even in an environment in Wellington where you're seeing a bit of growth, certainly growth in occupancy and some growth in room rates for the hotel market, it's still basically impossible to build new."
Refitting the building was costing around $1700 per square metre, compared to Cassels' estimate that it would cost $7000-$7500 for new builds "before you buy furniture".
A report from the Ministry of Business, Innovation and Employment released in May claimed New Zealand needed another 26 hotels - or 4500 rooms - over the next decade.
Cassels believed the inability to build new hotels which would be financially viable meant existing hotel operators were in a strong position.
"If you've got a well located hotel, it looks to me like your potential for growing revenue in the future looks quite bright," he said.
"This site is close to the waterfront. David Jones is across the road, Parliament is five minutes away, Cuba Street is five minutes away. It's a great place to be."
The hotel will include a restaurant, previously known at The Pub, which will operate as Sterling, owned by Stephanie Meyers and Simon Pepping, the partners behind Egmont St Eatery.
The new hotel follows hot on the heels of Wellington's new Sofitel Hotel, however the internationally owned hotel's fitout of a building on Bolton St was far more expensive, at around $51m.
Park Hotel is due to open shortly after the opening of the new David Jones department store, and weeks ahead of the All Blacks Bledisloe Cup battle against the Wallabies at Westpac Stadium.
A strong accommodation market was in contrast to that for office space where there was "one story after another of government departments rationalising and downsizing".
A weak office market made it unlikely that the building would be converted back into office space.
"That would have to be driven by rampant, unforeseeable demand," Cassels said.
"It's pretty unimaginable that the office market will recover to an extent that this use would be invalidated in this location."
Cassels already operates other accommodation elsewhere in Wellington, however the new hotel would target a higher paying customer.
"The target here is to do mid-range accommodation, mainly short-term, a little bit of long term, but imaginatively," Cassels said.
His original accommodation on Manners Street charged $100-$110 a night, but the new hotel would look to compete with the likes of the Ibis or the Novotel, which based on recent hotel sales, appeared to be trading strongly.
"It was plain to see, they've been doing very well, and...down this end of town, there's a lot of chains. Sofitel, Novotel, Ibis, places you can find anywhere in the world," Cassels said.
"They're generic. What I saw is the opportunity to provide something that ticks all the boxes, but offers a little bit more of the flavour of Wellington, a little bit more imagination."
Adding rooms in the central business district would help increase foot traffic around the city.
"In our own way, we're helping the ecosystem. We need more rooms in the city."
Currently, when major events such as the Edinburgh Military Tattoo came to Wellington, guests reportedly were forced to stay as far away as Levin, while smaller events often forced guests to stay in Petone or Johnsonville.
"That's not the best way to showcase the city [and] it's a symptom that we don't have enough [hotel] stock."
The latest venture was driven by a building with occupancy, rather than a desire to operate hotels, but Cassels said it was possible there could be other developments if the opportunity presented.
"I'm not a hotelier, I'm not looking to bang out another hotel, unless there's A, the demand, but B, the opportunity to create something a little bit different, a little bit imaginative, otherwise it's a bit boring and a bit hard."