Jon Dingle

22 – 25 Finsbury Square

Use of existing building for Class C1 (hotel) and Class A3 (restaurant) purposes, and associated extensions and alterations

Economic Regeneration Statement

December 2015

Jon Dingle

Contents

Paragraphs Pages

1 Introduction 1.1 – 1.3 1

2 Site and Surroundings 2.1 – 2.17 2 – 4

3 Proposals 3.1 – 3.3 5 – 6

4 Economic Regeneration Statement 4.1 – 4.20 7 – 11

Appendices

1. Proof of Evidence of Bridget Rosewell, Volterra – September 2014

Jon Dingle

1. Introduction

1.1. This Economic Regeneration Statement is submitted in support of the application for planning permission by The Montcalm Hotel Group (MHG) at 22 – 25 Finsbury Square, London EC2.

1.2. Planning permission is sought for,

Use of existing building for Class C1 (hotel) and Class A3 (restaurant) purposes, and associated extensions and external alterations

1.3. This Statement is set out under the following sections,

Section 2 analyses the site, its surroundings and planning history Section 3 describes the planning application proposals Section 4 sets out the relevant development plan policy and material considerations Section 5 considers the planning issues raised by the proposal against planning policy, guidance and material considerations Section 6 provides a conclusion

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2. Site and Surroundings

2.1. 22 – 25 Finsbury Square is located on the fringe of the City of London, within the Bunhill and Clerkenwell area of the London Borough of Islington.

2.2. The building was purpose-built in the 1950s for Royal London House for their single occupation and exclusive use; it was utilised for this purpose until their vacation in the early years of this Century. Until December 2014, the building was let to a range of tenants, including a D1 user, but much of the floorspace was vacant. The building is now a construction site and is under-going a conversion to hotel use following the grant of planning permission on 3rd November 2014.

2.3. The original building was arranged over basement, lower ground, ground and six upper floors and is located in the north-eastern corner of Finsbury Square. The building comprised 12,864 square metres (GIA) B1 (office) floorspace, and is configured in an “I” shape, oriented north-south with frontages on Finsbury Square and Worship Street.

2.4. The building, and the site itself, are unique on Finsbury Square being deep but constrained, so whilst each floor plate is large, the frontages of the site are narrow, and although there are lightwells to the east and west, the proximity and height of the neighbouring buildings restricts the amount of daylight that can enter each floorplate.

2.5. All the other buildings on Finsbury Square have frontages in proportion with the size of floorplate which allow significant amounts of daylight in to the buildings.

2.6. As the building was designed for a single occupier, there is one main entrance on Finsbury Square, with the Worship Street entrance being secondary. The services within the building are arranged for a single occupier, with the four lifts split into two pairs at either end of the building, and male and female toilets alternating on each floor at the Worship Street end of the site.

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2.7. Triton Court is located to the west, whilst the building to the east is currently under construction and nearing completion. Triton Court was built in 1929 and forms the dominant element on the north side of the Square.

Planning Designations

2.8. Located in the Central Activities Zone (CAZ), the front third of the site falls within the Finsbury Square / Bunhill Fields Conservation Area; the rear two thirds of the building are not within a conservation area.

2.9. The application site is identified within the Site Allocations Chapter of the Finsbury Local Plan as Site BC 28; the allocation confirms that “... Intensification of existing uses is considered appropriate”. However, it should be noted that the designation does not exclude other uses.

2.10. In addition, the building also falls within the Employment Priority Area (offices) and City Fringe Opportunity Area on Map FLP2 of the Finsbury Local Plan.

2.11. The site is highly accessible by public transport and this is reflected in its PTAL rating of 6a, the second highest. The offices and associated services of the City of London are all within easy, level walking distance of the site; indeed, Finsbury Square has the character and feel of the City.

2.12. Finsbury Square is characterised by 19th and 20th Century buildings as well as contemporary developments, all on a substantial scale. The Square itself is designated as a Protected London Square and described in Table 9.1 (Appendix 9: Heritage landscapes) of the Development Management Policies Submission as “Garden enclosure bounded on all sides by the roadway of Finsbury Square”.

2.13. The Square and the surrounding roads of Worship Street, Wilson Street and City Road are dominated by offices. A small number of Class A units are found at ground floor level in some of the surrounding buildings, particularly on City Road, whilst the nearest residential is to be found in the building adjacent to the site at 65 – 69 Wilson Street, where the redevelopment scheme included 8 units on the set-back top floors of the building.

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2.14. In addition, the recently opened South Place Hotel is located to the south of Finsbury Square at the corner of South Place and Wilson Street. It is a four star, 80- bedroom hotel and replaced an old office building.

Planning History

2.15. On 3rd November 2014, planning permission (P122324) was granted for,

Change of use from Class B1 (offices) to Class C1 (hotel), roof extensions and associated external alterations at 22-25 Finsbury Square

2.16. The approved scheme has been implemented and work to create the new, 256- bedroom, five-star hotel is well under-way. The building is a construction site, in the process of being converted and extended, and the previous office use ceased in December 2014.

2.17. It is relevant to note that the MHG would simply complete the implementation of the existing permission (P122324) if the current application proposals are not approved.

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3. Proposal

3.1. In the light of the approved scheme, which is currently under construction, the differences between the approved and proposed schemes can be summarised as follows,

i. Minor internal layout changes to the basement servicing and back of house areas ii. Minor internal layout changes to the lower ground floor iii. Internal layout changes to the ground floor involving the loss of 11 hotel bedrooms and the creation of a club lounge for hotel guests only iv. One additional hotel bedroom on each of the first to sixth floors (inclusive) v. Two additional hotel bedrooms on both the seventh and eighth floors vi. An extension of 159 sqm and one additional hotel bedroom at ninth floor vii. An extension of 193 sqm and a loss of six hotel bedrooms at tenth floor to allow for the creation of a restaurant with 129 covers inside the building and the potential, weather permitting, for 47 covers on the terrace viii. The area of green roof has been maximised and a total of 419 sqm is proposed ix. The area of PV panels has been maximised and a total of 69 sqm is proposed x. The proposals will lead to an increase in the number of people being employed on the site, with the restaurant requiring around 20 staff

3.2. The approved scheme provides for the creation of 256 hotel bedrooms and associated bars, restaurant and conference / banqueting space. The existing plant on the building is removed, along with the top two floors of the building, and four new floors and new roof plant created.

3.3. The proposed scheme provides for the creation of 250 hotel bedrooms and associated bars / restaurants and conference / banqueting space. The existing plant on the building is removed, along with the top two floors of the building, and

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four new floors and new roof plant created. The new ninth and tenth floors are extended when compared with the approved scheme.

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4. Economic Regeneration Statement

4.1. The Council require major developments incorporating employment uses to be accompanied by an Economic Regeneration Statement.

4.2. The Council’s guidance confirms that such statements should be provided on the economic impacts and potential regeneration benefits of the proposal. This should include:

i. Details of any jobs that might be created, supported or lost ii. Information on existing and proposed employment uses and occupants, including floorspace quantum iii. Information on potential occupiers, lease terms, etc iv. Plans demonstrating how employment floorspace will operate, including measures to ensure flexibility v. Information on affordable workspace provision vi. Potential community benefits vii. Regeneration strategies that might lie behind or be supported by the proposal

4.3. This Economic Regeneration Statement is provided in the light of the fact that construction of the approved scheme is already underway and, should permission not be granted for the proposed scheme, the applicant will simply complete construction of the approved Hotel. The site will therefore be used for a large, high quality hotel with associated facilities regardless of the outcome of this application.

4.4. Notwithstanding this important material consideration, the Statement considers the seven issues that the Council have identified an Economic Regeneration Statement should cover. In doing so, the Statement draws upon the work of Volterra, a leading economic consultancy, that was prepared in support of the approved scheme and considers the economic benefits to the local and London economies of the proposed high quality Hotel.

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4.5. The seven issues are considered as follows,

i. Details of any jobs that might be created, supported or lost

4.6. Prior to the commencement of the construction of the approved Hotel in February 2015, Royal London House was largely vacant, and provided accommodation for a small number of firms on low cost, short term lets. A survey in 2014, submitted to the Council in support of the approved scheme, found that only 70 people worked in the building.

4.7. In contrast, the approved Hotel will employ around 200 people; the proposed Hotel, with the addition of the 10th floor restaurant, would employ around 220 people. As a result of employment, training and financial commitments delivered through the approved Section 106 Agreement (which would be updated and rolled forwards to the proposed scheme), a significant number of these jobs will go to local people.

4.8. The proposed scheme will therefore deliver a greater number of jobs than the approved scheme.

ii. Information on existing and proposed employment uses and occupants, including floorspace quantum

4.9. The application submission has identified the existing and proposed employment uses and floorspace figures.

4.10. As set out above, the previous occupants of the office space were a small number of firms on low cost, short term leases.

4.11. The Hotel will be owned, developed and occupied by The Montcalm Hotel Group. This is the case for both the approved Hotel, which they are currently constructing, and the proposed Hotel.

4.12. The Montcalm Hotel Group own and operate high quality hotels, of a very similar character to the one planned for Royal London House, at the former Whitbread Brewery on Chiswell Street, at 151 City Road and at Wallenberg Place, just north of

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Marble Arch. In total, they have 650 hotel bedrooms in operation at the moment, with Royal London House providing an additional 265 / 260 bedrooms depending upon whether or not the proposed scheme is approved.

iii. Information on potential occupiers, lease terms, etc

4.13. As set out above, the Hotel would be owned and operated by The Montcalm Hotel Group.

iv. Plans demonstrating how employment floorspace will operate, including measures to ensure flexibility

4.14. One of the significant points the Inspector accepted when allowing the appeal for the approved Hotel was that the existing building, whose locally listed status made it highly desirable to retain, was not flexible and impossible to adapt to provide office accommodation, commensurate with its Finsbury Square location.

4.15. In any event, as set out above, the building is undergoing its conversion to a hotel and the proposed scheme seeks permission, in essence, for extensions to the top two floors. There is no scope to allow for the flexible use of the space within the building. The building will become a high quality hotel, and the proposed additional space is designed to be a restaurant, accessed through the Hotel.

v. Information on affordable workspace provision

4.16. The position on affordable workspace provision is addressed above. Given that the approved scheme is under construction, there is no scope or necessity to introduce affordable workspace. Should the Council insist on an element of such space being introduced into the new scheme, the applicant would simply build out the approval and occupy the Hotel on that basis.

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vi. Potential community benefits

4.17. As set out above, the Section 106 Agreement for the approved scheme, which would be updated and applied to the proposed scheme, provides a significant and detailed package of community benefits, many of which are already being delivered. These can be summarised as follows,

§ A payment of £300,000 (over 10 years) towards the provision of a BTEC Hospitality course to be run by local schools such as the Central Foundation Boys’ School § Provision of work experience places for all participants of the BTEC Hospitality course within The Montcalm Group’s hotels § Recruitment of 5 graduates of the BTEC Hospitality course per annum § Provision of 10 staff members to participate in the delivery of the BTEC course modules § A payment of £200,000 (£20,000 per annum for 10 years) towards the provision of hospitality training courses for unemployed local residents § Provision of up to 24 work experience places per annum for local trainees § Provision of no fewer than 4 staff members for one hour per session for 6 sessions per annum to mentor trainees at local community venues § Provision of unwanted staff uniforms, kitchen whites and catering equipment to local community centres for use in their training courses § The Hotel to recruit 25% of Montcalm Finsbury Square staff from unemployed Islington residents in partnership with Islington’s Business Employment Support Team § One meeting room in the Montcalm Finsbury Square to be provided free of charge to local groups for up to 6 days per annum § Participation in Islington’s BEST initiative

4.18. These benefits are considered to go to the heart of the Council’s aims and objectives as far as employment and training are concerned. The applicant, as a substantial local business, is working in partnership with the Council and local providers to train and recruit local residents and students into the workplace. It is for this reason that the Council have cited the applicant in a case study as part of their Islington Aspires initiative.

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vii. Regeneration strategies that might lie behind or be supported by the proposal

4.19. The regeneration benefits of the proposal to the wider economy have been considered in detail by Volterra in the evidence Bridget Rosewell prepared in support of the approved scheme. A copy of her Proof of Evidence is attached to this Statement.

4.20. The Proof details how the Hotel would provide a wide range of employment opportunities, attract money into the area, help to address the historic under-supply of hotels across London and serve the needs of businesses in the area. The Proof concludes that the site provides a highly suitable location for a Hotel, to the significant benefit of the wider economy.

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Appendix 1

APPEAL BY THE MONTCALM HOTEL GROUP

22 – 25 FINSBURY SQUARE, LONDON EC2A 1DX

PROOF OF EVIDENCE AND SUMMARY

OF

BRIDGET ROSEWELL, OBE, MA MPHIL (OXON)

DATED: SEPTEMBER 2014

London Borough of Islington Reference: P122324

Planning Inspectorate reference: APP/V5570/A/14/2213312

APPEAL BY THE MONTCALM HOTEL GROUP

22 – 25 FINSBURY SQUARE, LONDON EC2A 1DX

SUMMARY

OF

BRIDGET ROSEWELL, OBE, MA MPHIL (OXON)

DATED: SEPTEMBER 2014

London Borough of Islington Reference: P122324

Planning Inspectorate reference: APP/V5570/A/14/2213312

22-25 Finsbury Square Appeal Ref: APP/V5570/A/14/2213312 Proof of Evidence of Bridget Rosewell Document Ref: APP/BR/1

1. SUMMARY

1.1 I am an economist with specialist experience in economic development and analysis and with particular knowledge of London’s economy. Having reviewed the evidence in relation to the proposed hotel at 22 – 25 Finsbury Square ("the Site"), I conclude that it would be beneficial for London’s economy and for the local economy in the area. I have set out in this proof the evidence on which I rely and which has led me to this conclusion. In summary, I believe that a hotel on the Site would:

(a) create jobs for local people and opportunities for those most in need in an environment where they can progress;

(b) attract visitors, money and expenditure into the area, and into London more widely;

(c) help to address the historic undersupply of hotels in London, specifically serving the needs of businesses;

(d) improve the vibrancy and success of the area.

Provide jobs for local people and those most in need of opportunities

1.2 Whilst the overall quantum of jobs created by a hotel on the Site is lower than those associated with an office, having compared the occupation types with the skill levels and types of people seeking employment in the area, I conclude that the types of jobs provided by a hotel would be a better match for the locally unemployed people looking for jobs.

1.3 Furthermore, my research into the Appellant provides me with confidence that they are the kind of employer which offers great opportunities for people with low formal skill levels and subsequent career progression. Their partnership with the Central Foundation Boys' School, with work experience, placements and employment opportunities shows me that they are committed to providing as many opportunities as possible for people within the local area.

1.4 This increases the likelihood that local people will take up the job opportunities, and the fact that people who may otherwise have been unemployed may take up these opportunities also has social benefits which should be given value in addition to simply considering the absolute quantum of jobs created.

Attract money into the area, and London more widely

1.5 My analysis, based upon average expenditure levels of hotel visitors concludes that the hotel would attract £5.2m in expenditure to the local area each year (this is in addition to the expenditure at the hotel itself). Allowing for the expenditure that would occur within the local area from an office option, I conclude that the net impact would be £3.5m per annum of additional expenditure locally, which is a significant impact.

1.6 Having considered the total value of the hotel visitors (money spent both within and outside of the hotel), and the total value of the alternative option of office use, along with 1

22-25 Finsbury Square Appeal Ref: APP/V5570/A/14/2213312 Proof of Evidence of Bridget Rosewell Document Ref: APP/BR/1

the likely proportion of hotel visitors that would come from abroad, I estimate that the hotel would attract £14.7m of international money into London, 45% more international money than an office here would attract. Attracting foreign visitors and investment is crucial to London’s future competitiveness.

1.7 There are a variety of ways of measuring the economic importance of a place and whether it is attractive to tourists and international investors. On any of these measures, London is one of the most visited cities in the world and one of the most popular to do business. Remaining attractive as a place to live, work and visit is crucially important to retaining the city’s position. Hotels play a crucial role in this, in providing appropriate accommodation for visitors to stay.

Help to address the historic undersupply of hotels across London and serve business need

1.8 My review of the evidence on hotel supply in London has shown that visitor numbers have continued to rise, occupancy has risen, and prices have gone up in real terms, and all of this has occurred alongside a steady increase in the stock of hotel rooms. When prices continue to rise in real terms alongside increased demand and supply, this is an indication that the demand is continuing to exceed the supply, causing prices to continue to be pushed up.

1.9 The GLA’s target for hotel room provision, at the London level, is based upon a continuation of past trends. The GLA acknowledge that this could be an underestimate of what is needed, and their higher scenario has growth 40% above this by 2036. Any future projection based upon past trends implicitly assumes that any historic conditions remain constant. By projecting forward based upon past trends which show a long running undersupply of space and a pent up demand for more rooms, the future projections continue to project this persisting into the future. Delivering more hotel rooms would assist in delivering some much needed additional visitor accommodation in London which should help to alleviate some of the long term historic pent up demand.

1.10 Furthermore, at the borough level, the GLA’s targets assume that the future spatial distribution of hotel accommodation across London remains the same. My review of the provision in Islington shows that it has historically provided some of the lowest levels of hotel rooms and therefore the GLA targets project this to continue. Evidence shows that there is a strong relationship between occupied office space and business hotel demand and that business tourists prefer to stay close to their place of work. The Study Area of Islington, City of London, Tower Hamlets and Hackney contains 32% of London’s professional employment which is generating business demand for hotels, but only 9% of the city’s hotel stock. My analysis suggests that the businesses in the Study Area are generating demand for at least 35,000 rooms but they only have 12,350 suggesting the current hotels only provide rooms for a third of the demand generated by businesses in the Study Area.

1.11 Building a hotel here would therefore help to better serve the business needs of companies located within the City and surrounding area. These businesses are crucially important to the future success of London.

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Conclusion

1.12 On the basis simply of quantum of employment generated, if a hotel and an office are equally likely to be successful on the Site, then on the methods that we typically evaluate developments, an office at the Site would be better because it will generate more employment opportunities. And at the margin, when considering just any individual development site at a time, there is no reason to assume that they wouldn’t be equally successful. However this direction of thought must be incorrect because if it were true then all available land in the area should be offices.

1.13 At the extreme the result of this would be that all space becomes offices because individually this is always the highest job generating use. This means that there would be no hotels, restaurants or other uses and the place would become unattractive and people would leave. Indeed the City used to be much more monocultural and it was less successful. In recent years it has reinvented itself as somewhere more vibrant and exciting, where there are bars, restaurants, hotels and other uses. As a result, the City has become more attractive again.

1.14 We cannot be precise about the individual relationships and decisions that lead to places becoming more or less attractive, as there are many confounding factors, but qualitative evidence tells us that it is true that mixed-use places are more vibrant and more successful. Therefore, when considering the Site, we need to distinguish between the individual Site and the more general case for a hotel in the vicinity. If we accept that a hotel can be a good thing, then this is a highly suitable location.

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APPEAL BY THE MONTCALM HOTEL GROUP

22 – 25 FINSBURY SQUARE, LONDON EC2A 1DX

PROOF OF EVIDENCE

OF

BRIDGET ROSEWELL, OBE, MA MPHIL (OXON)

DATED: SEPTEMBER 2014

London Borough of Islington Reference: P122324

Planning Inspectorate reference: APP/V5570/A/14/2213312

22-25 Finsbury Square Appeal Ref: APP/V5570/A/14/2213312 Proof of Evidence of Bridget Rosewell Document Ref: APP/BR/2

TABLE OF CONTENTS

Page No.

1. QUALIFICATIONS AND EXPERIENCE ...... 1 2. INTRODUCTION ...... 2 3. BACKGROUND ...... 3 4. DIRECT JOBS AT A HOTEL ...... 6 5. DIRECT JOBS IN AN OFFICE ...... 12 6. JOBS FOR THE LOCAL POPULATION ...... 15 7. INDIRECT AND INDUCED IMPACTS ...... 21 8. WIDER BENEFITS ...... 26

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1. QUALIFICATIONS AND EXPERIENCE

1.1 I am an economist with specialist experience in economic development and analysis over several decades. I am Senior Partner of Volterra and I hold non-executive directorships at Network Rail and at the Ulster Bank Group. I was awarded an OBE for services to the economy in June 2013.

1.2 For over ten years, until May 2012, I was Chief Economic Adviser at the Greater London Authority. In this role I led GLA Economics, which provides expert advice and analysis on London’s economy and the economic issues facing the capital to the GLA Group. I have been responsible for analysis and forecasts of the London economy and its constituent parts as well as for advice on the economic impact of mayoral policies.

1.3 I have prepared the employment forecasts which underlie the London Plan (which sets out an integrated economic, environmental, transport and social framework for the development of London over the next 20 to 25 years) and have given evidence in their support at successive Examinations in Public into the London Plan. As Chief Economic Adviser at the Greater London Authority, I had an on-going responsibility to ensure that the case for investment in London is made to central government.

1.4 I advise on major projects. In particular, I was responsible for developing the economic case for Crossrail and the significant changes to evaluation techniques which this required in order to take into account the benefits of delivering more people in central London. In November 2013 I gave evidence at the Public Inquiry into the extension of the Northern Line (NLE). My evidence covered the economic case for the extension. The primary aim of the NLE is to encourage economic growth in London and the wider UK economy by making possible the sustainable regeneration and development of the Vauxhall Nine Elms Battersea (VNEB) Opportunity Area (OA).

1.5 I have been responsible for advising a number of clients on the economic case for developments in a variety of sectors including industrial plants and leisure facilities as well as office and housing developments. I advised on the developments at Ebbsfleet in Kent and on a proposed new cement plant in Medway. Most recently, I have advised on a quarry in Kent, a glasshouse development in Sussex and film studios in Buckinghamshire.

1.6 I founded my previous consultancy, Business Strategies Ltd, in 1988 which developed methods of localised economic forecasting and impact analysis which are widely used by local authorities.

1.7 I took my first degree at the University of Oxford in 1974 and subsequently took the MPhil in Economics at the University of Oxford in 1976. Prior to entering consultancy, I taught at the University.

5781034 1 22-25 Finsbury Square Appeal Ref: APP/V5570/A/14/2213312 Proof of Evidence of Bridget Rosewell Document Ref: APP/BR/2

2. INTRODUCTION

2.1 The Appellant is proposing to redevelop 22-25 Finsbury Square ("the Site") for use as a 256 bedroom high quality hotel ("the Scheme"). The Site is currently designated for employment use.

2.2 In this context, and in my role as an economist, my evidence will cover:

(a) Background to the Appellant and their proposition for the Site (section 4)

(b) The jobs that will be created by the Scheme (section 5), how this compares to an office use on the Site (section 6), and the types of jobs that the Scheme will offer along with their suitability for local residents (section 7)

(c) The indirect and induced impacts that either use could have through the supply chain and visitor expenditure, and what proportion of this impact could be within the local area (section 8)

(d) The importance of tourism to London’s economy, the crucial role that hotels play in supporting this, evidence of continued undersupply of hotel rooms in London, and the international flow of money that hotels facilitate into the Capital (section 9)

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3. BACKGROUND

3.1 In this section I briefly describe: who the Appellant is, and how many hotels and brands they have, including the specific Montcalm brand which is proposed at the Property; why they have identified the Site for a hotel; and some details about the company and its community linkages which are relevant to the Scheme and the socio-economic impacts I go on to describe in section 7.

What is the Shaftesbury Hotels Collection?

3.2 The Shaftesbury Hotels Collection (Shaftesbury) is a London based Accommodation Company. Shaftesbury has a variety of hotel accommodation across central London.

3.3 Shaftesbury is a family owned and managed company, whose owners have significant experience in the UK, Canada and US. The owners, the Lalji family, are the founders of Larco Investments Ltd, one of Canada’s largest and most respected privately held real estate firms. In 1998 they established their hospitality arm in Canada to manage a portfolio of hotels purchased by the investment arm of the company.

3.4 Since its inception in the UK in 2000, Shaftesbury has acquired 22 properties and established three different brands of hotel: Montcalm, Shaftesbury Elite Collection, and Park Grand. The hotel proposed at the Site will be a Montcalm hotel.

What is the Montcalm brand?

3.5 Montcalm is the company’s luxury brand and currently there are four Montcalm hotels in operation in London, as well as a new hotel under construction on City Road, Hackney.

3.6 The four existing Montcalm hotels are:

(a) the original 153-bedroom Montcalm London Marble Arch, which was acquired in 2007 and reopened in 2009, is located on Great Cumberland Place near Marble Arch

(b) the 43-bedroom The Marble Arch by Montcalm, a small boutique hotel opposite the original Montcalm Hotel, opened in 2010

(c) the 210-bedroom Montcalm London City at Brewery, located 0.6 miles from the site at 52 Chiswell Street, which was opened in 2011; and

(d) London City Suites by Montcalm, the sister hotel to The Brewery, is located at 42-46 Chiswell Street, with 25 suites and also opened in 2011.

3.7 All of the existing hotels are located within original buildings and have been designed to maximise these existing buildings and fit within their settings. The original Montcalm London Marble Arch and The Marble Arch occupy town houses and are located within Westminster’s Portman Square conservation area. The Brewery was formerly the site of Whitbread & Co, Britain’s first purpose-built mass production brewery.

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3.8 M by Montcalm is due to open in 2014 and is based on City Road. It is an entirely new build 269-bedroom hotel, designed to fit within its setting within tech city.

3.9 The ethos of the Montcalm brand is to provide luxury hotel accommodation within an appropriate setting for the surrounding area. The Montcalm at Marble Arch and the Brewery on Chiswell Street have both done this through maximising and building upon the history of the existing buildings in which they are set, and City Road will do this through being a modern state of the art building within a wider new development.

3.10 All of the Montcalm hotels are highly rated. The two larger hotels which are most comparable to the proposition at Royal London House have the following ratings on TripAdvisor:

(a) The Brewery: 98% positive ratings1, and ranked number 24 of 1,073 hotels in London – within the top 2.5% of hotels in London2

(b) Montcalm Hotel London: 94% positive ratings, and ranked number 20 out of 1,073 hotels in London – top 2% of hotels in London

3.11 The Appellant has shared occupancy rates of their existing Montcalm hotels with me, which show that they have been high since they opened. So far for 2014 The Brewery has achieved average occupancy of around 80%. The fact that the existing Montcalm hotels have experienced such high occupancy rates and are highly rated by their visitors suggests that they are successfully understanding and meeting the needs and expectations of their customer base.

Why Royal London House?

3.12 The Appellant acquired the Site from NAMA (National Asset Management Agency) in December 2011, having recognised that the Site fits well with the ethos of the Montcalm brand, has floor plates that would work well for a hotel and is in an attractive location for a hotel of this nature.

3.13 The Scheme will extend and adapt the existing locally listed building for use as a hotel. This type of strategy to promote the re-use of an existing building in a historic London square such as Finsbury Square is in keeping with the Montcalm ethos.

3.14 The close proximity to the Brewery and City Road Montcalm hotels offers the possibility to achieve efficiencies across the sister hotels within the same brand, as well as expanding their apprenticeship scheme which is being run in conjunction with the Central Foundation Boys’ School.

Montcalm and the community

3.15 As detailed previously, Montcalm is a family run business. It has a history of making substantial commitments to the local community. Full details on the obligations directly linked to this scheme can be found in the Section 106 agreement, but include the

1 Rated as either excellent or good, out of the options: excellent, good, average, poor, terrible 2 Of those hotels listed on tripadvisor. Information correct as of 26 August 2014.

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following which I believe usefully highlight the company ethos, their commitment to the local community and are of specific relevance to the socio-economic benefits that I detail later in section 7:

(a) a direct contribution to the BTEC Level 3 Hospitality Course at the Central Foundation Boys’ School, provision of work experience placements, and recruitment of school graduates as hotel employees

(b) a further contribution to be spent by the Council on hospitality training at venues within the local area for local residents who are not in employment

(c) commitment to apprenticeships for local residents during the construction period

(d) provision of one meeting room within the Montcalm Finsbury Square free of charge for local non-for-profit groups for up to 6 days per year

3.16 The Appellant created the partnership with the Central Foundation Boys' School in 2013. This partnership was the first of its kind in Islington and supports the BTEC Hospitality Course both financially and through work placements. Details of this partnership and the impacts it has upon students are provided in the Proof of Evidence of Jamie Brownhill, the Headmaster.

3.17 The Appellant provides work experience placements for local residents of Islington, annual mentoring programmes, and graduate positions at the Montcalm hotels and is committed to providing apprenticeships during construction which are taken by local residents. These represent very real and accessible job opportunities for young residents of Islington and the surrounding area and demonstrate a commitment from the Appellant to the local communities in the areas around their hotels.

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4. DIRECT JOBS AT A HOTEL

Number of jobs in a hotel – standard estimates

4.1 The standard way to estimate the jobs created by new developments is to apply widely- used job densities3 which differ depending upon the type of floorspace or development proposed. For 4-5 star hotels this assumes that there is one full time equivalent job created for every 1.25 bedrooms. The number of bedrooms proposed at the hotel on the site is 256, meaning on this basis I would estimate that it would support 205 direct full time equivalent jobs.

Table 4.1: Job creation at the proposed hotel

Number of bedrooms Jobs Density Number of employees 256 1 employee per 1.25 rooms 205 = 0.8 employees per room Source: Montcalm Group; HCA employment Densities Guide; Volterra calculations

Actual client experience from other Montcalm hotels

4.2 In order to verify whether this is an appropriate estimate of job creation, I have been provided with job numbers at the Montcalm London City at Brewery and Montcalm London Marble Arch hotels, along with the number of bedrooms at each of those hotels and this gives me reassurance that the ratio of jobs to hotel rooms is consistent with what the guidance suggests, and therefore gives me confidence that the 205 jobs will be delivered. These figures are shown in the table below.

4.3 As stated above, the guidance suggests that for every 1.25 bedrooms in a 4-5 star hotel, one employee would be needed. The equivalent figure for the Marble Arch hotel is 1 employee per 1.27 rooms, which is very similar. For the Montcalm London City at Brewery hotel it is a lower number of employees per room, at 1 employee per 1.87 rooms. However this is due to the fact that this hotel outsources its catering, which is a significant proportion of employment within many hotels. The proposed hotel on the Site would have a restaurant and bar on site and so there would be employment associated with them. The catering company who does the catering for Montcalm London City at Brewery (ETM Group) provided estimates of how many people they employ specifically linked to this hotel. Including this within the employment calculations results in an estimate of 1 employee per 1.22 rooms, which is again very similar to what the guidance suggests. Taken together, the analysis of the actual numbers of people employed at the other Montcalm hotels provides me with confidence that at least 205 jobs would be delivered on the Site.

3 Employment Densities Guide, Homes and Communities Agency, 2010

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Table 4.2: Jobs at Montcalm London City and Marble Arch hotels

Hotel No. bedrooms Employees Employee density Montcalm London City 235 126 1 employee per 1.87 rooms at Brewery & London (192)4 = 0.54 employees per room City Suites (1 employee per 1.22 rooms = 0.82 employees per room) 4 Montcalm London 196 154 1 employee per 1.27 rooms Marble Arch & The = 0.79 employees per room Marble Arch by Montcalm Source: Montcalm Group

Types of jobs in a hotel

4.4 Most people have experience of going to a hotel, although few will have actually run one or have thought about the details of how they operate. I therefore briefly outline here the different aspects of a hotel. This ranges from behind the scenes aspects such as booking a room and dealing with any queries through to the very obvious aspects of a hotel which any visitor sees – being greeted on arrival, checking in, having bags taken. In addition to this there are other aspects which affect the satisfaction of guests during their stay which include the cleanliness of your room, and the facilities available while staying such as eating and relaxation. Furthermore, many hotels also offer banqueting and events which can be accessible to both overnighters and day visitors. In addition to these aspects specific to a hotel, there are the general business operations that any business requires such as accounts and IT support. All of these different aspects of the running of a hotel create different types of jobs.

4.5 In order to run a hotel, the majority of hotels use a mixture of payroll and agency staff. Whilst on the one hand this offers fewer permanent full time positions, it also means that hotels offer a much wider range of types of positions, flexibility and opportunities for a wider range of people.

4.6 Various studies show that women, and those caring for children, are more likely to take flexible job opportunities that they can fit around childcare. Studies show that people value part-time working as it offers a better work-life balance. Hotels, with agency, flexible, and night-time positions offer a variety of different types of opportunities which can appeal to those trying to balance their work with other parts of their lives. Agency positions also often offer opportunities for people seeking temporary work for a variety of reasons such as they are studying and need part time work. Flexible working opportunities are therefore a valuable part of the economy.

4 The numbers in brackets include staff associated with the catering which is all outsourced to ETM Group. ETM provided us with estimates of employee numbers which we converted to FTEs using the English Partnership guidance on average proportion of leisure staff who are part time and average hours worked by part time staff.

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The Appellant’s estimates of jobs at Finsbury Square

4.7 In addition to comparing the estimated employment with the actual employment at The Appellant’s Marble Arch and London City hotels, the client team has also prepared a detailed estimate of the exact number and nature of positions that they would need in order to run the proposed hotel. The chart below shows the hierarchy of jobs associated with running a hotel, and the table below provides estimates of the numbers of jobs across various categories. The client already runs several hotels and therefore has direct experience of operating and staffing hotels, as can be seen from the detailed nature of the proposed staffing schedule.

Figure 4.3: Hierarchy of hotel jobs

Hotel Manager

House Manager

Front office Guest Experience Executive Head Maintenance Manager Manager Housekeeper Manager

Asst. FOM Head Night Guest Experience Asst. Concierge Manager Host Housekeeping Maintenance Manager Assistant Duty Managers Day Night Concierge Receptionist Floor Supervisors Receptionis Night Night t Concierge Auditor Public Area Cleaner Porters Night Switchboard Porters

Doorman

Source: Montcalm Group

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Table 4.4: Proposed staffing for hotel in Finsbury Square

Senior Management Hotel Manager 1 House Manager 1 Front Office Front Office Manager 1 Receptionist 8 Assistant Front Office Manager 1 Duty Managers 4 Night Team Night Manager 2 Night Porters 3 Night Receptionist 2 Night Concierge 2 Night Auditor 3 Guest Experience Guest Experience Managers 2 Guest Experience Host 2 Concierge Head Concierge 1 Doorman 4 Concierge 4 Porters 4 Housekeeping Executive Housekeeper 1 Public Area cleaner 5 Asst. Housekeeping Manager 1 Housekeeping Maids 25 Housekeeping Floor Supervisors 10 Evening Maids 14 Maintenance Maintenance Manager 1 Maintenance Assistants 5 Assistant Maintenance Manager 1 Food and Beverage Club Lounge Supervisor 3 Club lounge assistant Hotel Restaurant & Bar 13 (VIP amenities/mini bar) 3 Room Service attendants 11 Kitchen Porters 6 Kitchen Head Chef 1 Commis 6 Sous Chefs 2 Events Support Team Director of Events Sales 1 Events Operations Coordinator 2 Events Sales Managers 1 Banqueting staff 25 Events Executive 2 General porters 10 Events Operations Manager 2 Others 10 Spa team Spa Manager 1 Spa receptionist 3 Spa therapist 3 Gym trainers 2 Sales DOS 1 Sales Coordinators 2 Sales Managers 2 Groups Manager 1 IT Support Accounts IT Assistants 2 Accounts Assistants 3 Switchboard Reservations Switchboard operator 5 Reservation agent 2 Total 233 Source: Montcalm Group

4.8 As the table shows, a great deal of detail has gone into estimating the actual individual staffing requirements that would be needed to run the hotel. This ranges from the most

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senior positions of hotel manager and house manager, through to housekeeping maids and banqueting staff, positions which are more likely to be filled through agency staff.

4.9 Table 4.4 estimates that the Scheme would support 233 full time equivalent positions. Again, this provides me with further reassurance that my estimate of 205 jobs being created by the Scheme is reasonable. Referring back to my earlier comparisons to the other Montcalm hotels (see Table 4.2), this results in a ratio of one employee per 1.1 rooms which is slightly higher than, but comparable to, the actual experienced employment at the Appellant’s other hotels. The Appellant’s estimates of staffing for the Scheme are that 120 jobs would be on the Montcalm payroll and 113 would be agency staff. As I have detailed previously, there are many benefits of flexible working.

Comparison with industry standard occupation classifications

4.10 The table above showed the split of jobs across types. For statistics on jobs, there are standard occupational classifications into which jobs are allocated. I have compared the proposed staffing schedule against the definition of these different occupation types and present the split of jobs across different occupation classifications in the table below. In order to reinforce this I have also accessed more generic data for the appropriate sector which includes the hotel industry and split this by occupation level (shown below).

4.11 Due to the location of the Site within the borough of Islington, but very close to the City of London and on the boundary between four London districts – Islington, City of London, Tower Hamlets and Hackney – within this evidence I consider relevant statistics at this four borough level and refer to this as the Study Area.

4.12 This shows that the proposed hotel jobs are more heavily weighted towards elementary occupations than even the wider sector into which hotel employment falls. However the distribution also shows considerable opportunities within sales and service positions, as well as administrative, secretarial and managerial roles. In section 7 I go on to discuss the extent to which this fits with job seekers in the area, and also the opportunities for job progression which the hotel supports.

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Table 4.5: Estimated occupational split of jobs at Finsbury Square hotel, compared with wider Distribution, Hotel & Restaurant sector across the Study Area5

Distribution, Hotel & Hotel proposed Restaurant jobs in workers Study Area number number Occupation proportion proportion of jobs of jobs Managers, directors and senior officials 25 11% 9,327 15% Professional occupations 0 0% 2,545 4% Associate professional & technical occs. 0 0% 5,426 9% Administrative and secretarial occupations 25 11% 3,542 6% Skilled trades occupations 9 4% 8,403 13% Caring, leisure and other service occupations 20 9% 1,138 2% Sales and customer service occupations 24 10% 17,683 28% Process, plant and machine operatives 0 0% 1,606 3% Elementary occupations 130 56% 13,572 21% Total 233 100% 63,242 100% Source: Census 2011, Occupation by Industry tables, Montcalm Group, Volterra

4.13 In the next section I undertake a similar exercise to consider the office jobs which an office in this location could support. In the following section I then go on to compare the two, and compare them with the people seeking work in the area.

5 Data from the Census 2011, therefore residents based for the 4 boroughs of Islington, City of London, Hackney and Tower Hamlets

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5. DIRECT JOBS IN AN OFFICE

5.1 In comparison to the hotel scheme where a direct operator is known and they have estimated detailed staffing schedules for the proposed hotel, in this section in order to compare the likely jobs that could be accommodated in an office on the Site, instead I detail the current occupancy of the building, the highest hypothetical occupancy with its current floorspace, and how many office jobs could be located within a new build office development on this Site.

Current building use

5.2 The building is currently let on short term leases to a variety of companies. I understand that a survey was undertaken last year which concluded that there are currently around 100 employees located within the building. All current tenants are on leases which expire on or before 31 December 2014.

5.3 The existing amount of floorspace available is 8,292 sq.m, of which 593 sq.m (7%) is vacant, 2,757 sq.m (33%) is let to tenants for office uses, and the remainder (4,942 sq.m, 60%) is let to Community Resilience which is a charitable organisation which would only use the space in case of emergencies, meaning that they have no regular daily employees. The 100 jobs associated with the 33% of the Site let to active tenants therefore gives an employment density of around 24 sq.m per office employee, which is around double the amount of floorspace per worker than the widely accepted standard of 12 sq.m per employee, suggesting that in its current condition, the office is not attracting the quantity or quality of office tenants that a building in this location should.

Table 5.1: Current tenants on site, as at April 2014

Occupier name Floorspace % of total Employee generating tenants Asset Skills (Upkeep Training) 144 2% Carbondesk Group PLC 121 1% City Equities (in Administration) 594 7% Community Advice Service Limited (CAS) 25 0% Go Cardless 289 3% Iranian and Kurdish Women's Rights Organisation 134 2% One20 251 3% Phenomen 886 11% Smarkets 312 4% Total (employee generating) 2,757 33% Emergency Aid 4,942 60% Vacant 593 7% Total 8,292 100% Source: Montcalm Group

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Hypothetical occupancy of existing floorspace

5.4 At standard guidance density levels6, the total current office floorspace could accommodate 690 jobs, which is nearly 7 times higher than its current use.

5.5 This shows that the office is currently let to tenants employing people here at well below the densities that you would expect for an office in this location.

Number of jobs in an office on the site

5.6 5plus Architects have designed a hypothetical, realistic, BCO-compliant (Grade A) office scheme for the Site. They conclude that this would provide 9,311 sq.m of net office space. The same guidance5 that I used for estimating jobs supported by a hotel states that on average for every 12 sqm of office floorspace, one full time equivalent office employee is accommodated. This means that the refurbished office building on the Site would accommodate an estimated 776 employees.

Table 5.2: Job creation at new build office on the Site

Net office space Jobs Density Number of employees 9,311 sq.m 1 employee per 12 sq.m 776 Source: 5plus Architects; HCA employment Densities Guide

5.7 Unlike with the hotel, I am unable to identify a specific occupier or set of occupiers that would occupy the space and employ these workers directly. In the next section I consider the types of jobs in offices.

Types of jobs in an office

5.8 The table below shows the typical occupational distribution of office employees7, and compares it against the statistics I presented earlier for this hotel. This shows a stronger distribution towards higher skilled employment types in offices and a bigger weighting towards elementary occupations in the hotel. In the next section I compare this with the local population.

6 Employment Densities Guide, Homes and Communities Agency, 2010

7 As ‘office employment’ is not a category, I have proxied for this using the industrial category “K, L, M, N Financial, Real Estate, Professional and Administrative activities”

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Table 5.3: Estimated occupational split of jobs at Finsbury Square hotel, compared with office sector, across the 4 boroughs

Office Proposed Occupation category % hotel % 1. Managers, directors and senior officials 14% 11% 2. Professional occupations 33% 0% 3. Associate professional and technical occupations 30% 0% 4. Administrative and secretarial occupations 10% 11% 5. Skilled trades occupations 2% 4% 6. Caring, leisure and other service occupations 3% 9% 7. Sales and customer service occupations 2% 10% 8. Process, plant and machine operatives 1% 0% 9. Elementary occupations 7% 56% Source: Census 2011, Occupation by Industry tables, Montcalm Group, Volterra

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6. JOBS FOR THE LOCAL POPULATION

6.1 Whilst the Site is located within one of the most important economic activity zones in the country, we mustn’t forget that there are also some significant pockets of deprivation, qualification deficiencies and unemployment problems within the local area. Indeed, one of the criteria set by Islington Council is for any development at the Site to generate significant local employment i.e. for workers to be Islington residents8.

6.2 In this section I consider how well suited the proposals are for the local community, and the extent to which they could positively impact upon the existing socio-economic problems.

Socio-economic characteristics of the local area

6.3 Table 6.1 shows the proportion of residents of Inner London boroughs with various levels of qualifications9. Across the Study Area as a whole, the population has a high proportion of residents with level 4 or above qualifications (44%). This is higher than both the regional and national rates. However, relative to the London average, the Study Area also has a higher proportion of the resident population with no qualifications. If we look across the four boroughs that make up the Study Area, we see that the City of London has a very high proportion of its population with the highest qualification level, and a very low proportion with no qualifications. In contrast, Islington, Hackney and Tower Hamlets have some of the lowest proportions with the highest qualification level out of all Inner London boroughs, and some of the highest proportions with no qualifications. This suggests that the Study Area appears to exhibit a polarised performance in terms of the skill levels of its residents – i.e. it has lots of highly qualified people but also higher proportions of people with no skills than might be expected.

8 See Planning Committee refusal letter, June 2013

9 The highest level of qualification are defined as follows: None = no qualifications; Level 1 = 1-4 O Levels / CSE / GCSE (any grades), Entry Level, Foundation Diploma, NVQ Level 1, Foundation GNVQ, Basic/Essential Skills; Level 2 = 5+ O Level (Passes) / CSEs (Grade 1) / GCSEs (Grades A*-C), School Certificate, 1 A Level / 2-3 AS Levels / VCEs, Intermediate / Higher Diploma, Welsh Baccalaureate Intermediate Diploma, NVQ Level 2, Intermediate GNVQ, City & Guilds Craft, BTEC First / General Diploma, RSA Diploma; Apprenticeship; Level 3 = 2+ A Levels / VCEs, 4+ AS Levels, High School Certificate, Progression / Advanced Diploma, Welsh Baccalaureate Advanced Diploma, NVQ Level 3, Advanced GNVQ, City & Guilds Advanced Craft, ONC, OND, BTEC National, RSA Advanced Diploma Level 4 & above: Degree (for example BA, BSc), High Degree (for example MA, PhD, PGCE), NVQ Level 4-5, HNC, HND, RSA Higher Diploma, BTEC Higher level, Foundation degree (NI), Professional qualifications (for example teaching, nursing, accountancy); Other qualifications: Vocational / Work-related Qualifications, Foreign Qualifications (not stated / level unknown).

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Table 6.1: Qualifications of Residents; Percentage of Residents10 Area / highest Level Level Level Level 4 None Apprenticeship Other qualification level 1 2 3 or above City of London 6.7 4.3 6.6 0.7 7.2 68.4 6.2 Wandsworth 11.6 6.6 8.4 1.0 10.0 53.6 8.9 Kensington & Chelsea 10.1 5.8 7.9 0.7 10.0 52.7 12.9 Camden 12.7 6.8 7.8 0.8 12.1 50.5 9.2 Westminster 12.8 6.6 7.8 0.8 9.2 50.3 12.6 Hammersmith & 12.8 7.0 8.3 1.2 10.7 49.6 10.5 IslingtonFulham 17.0 8.0 8.4 1.0 9.8 48.1 7.8 Lambeth 14.2 8.5 9.8 1.1 9.7 46.6 10.1 Southwark 16.3 9.4 10.2 1.1 10.5 43.1 9.3 Hackney 19.6 9.0 10.0 1.0 9.3 41.8 9.4 Tower Hamlets 20.0 9.3 8.7 0.9 10.1 41.0 10.0 Lewisham 17.7 11.1 12.5 1.4 10.8 38.0 8.5 Study Area Average 18.8 8.7 9.0 0.9 9.7 43.7 9.1 London 17.6 10.7 11.8 1.6 10.5 37.7 10.0 England 22.5 13.3 15.2 3.6 12.4 27.4 5.7 Source: 2011 National Census; Qualifications and Students; ONS

6.4 In order to consider the impact that any employment generating development could have, it is also necessary to consider the extent of unemployment in the Study Area, along with the type of unemployment. More specifically, to ensure that the hotel creates local employment, it is vital that those out of work are suited to the type of work created by the hotel. This is evaluated by considering both Claimant Count rates, but also the proportion of claimants that are seeking elementary occupations.

Table 6.2: Claimant Count for Study Area, average for 2013

Area Claimant Count rate City of London 1.8% Hackney 5.0% Islington 3.9% Tower Hamlets 4.9% 4 borough Study Area 4.6% Inner London 4.0% London 3.5% England 3.4% Source: Claimant Count

10 Note, rows may not sum to 100 per cent due to rounding

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Fit of job opportunities with the local population

6.5 In this section I consider the jobs that would be created by a hotel, and those that would be associated with an office, and the match of these different types of jobs with the local population. As I detailed previously, the jobs created at a hotel would be more heavily weighted towards elementary occupations than office jobs. I therefore consider how many people in the local area are looking for jobs of the types that would be created in order to assess how beneficial the jobs might be for the local community.

6.6 The table below shows the likely distribution of jobs across occupation types that would be created by either a hotel or an office, and compares it to the types of jobs sought by job seekers. The first three columns show this in terms of proportions, and the second set of three columns show the numbers of jobs. This shows that whilst the hotel would create fewer total jobs on site (233 in comparison to 776 from an office), it would create a higher number of elementary and sales & customer service positions (130 in comparison to 51 for elementary and 24 in comparison to 16 for sales & customer service), and that these are by far the largest groups of jobs (56%) that unemployed residents of the area are looking for.

6.7 Specifically, in 2013 there were on average 5,060 residents within the Study Area who were looking for elementary positions, and this is where the majority (130) of the hotel job opportunities would be for these job seekers to potentially access. In comparison, just 3,670 people living in the Study Area who are seeking employment are looking for either managerial, professional or associate professional positions, and an office would create an estimated 590 of these job opportunities (76% of the opportunities created).

6.8 These statistics show that a hotel is much more in line with the occupations sought by job seekers in the Study Area. In turn, this suggests that because the types of jobs on offer at a hotel are more consistent with those sought by unemployed residents, then it is much more likely that residents would take up these opportunities.

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Table 6.3: Occupation types in hotel v office jobs, compared to those sought by job seekers Distribution across occupations Number of jobs Job Job Occupation Hotel Office seekers Hotel Office seekers Managers and senior officials 11% 14% 3% 25 108 740 Professional occupations 0% 33% 3% 0 252 850 Associate professional and technical occupations 0% 30% 8% 0 230 2,080 Administrative and secretarial occupations 11% 10% 13% 25 80 3,120 Skilled trades occupations 4% 2% 6% 9 12 1,550 Personal service occupations 9% 3% 6% 20 20 1,480 Sales and customer service occupations 10% 2% 35% 24 16 8,730 Process, plant and machine operatives 0% 1% 4% 0 7 1,030 Elementary occupations 56% 7% 21% 130 51 5,060 Total 100% 100% 100% 233 776 24,650 Source: Montcalm Group, Census 2011, Claimant Count 2013 * Totals may not sum due to rounding

6.9 I conclude that the jobs associated with a hotel are more likely to have beneficial impacts for the local population than an office use on the Site. The types of jobs on offer at a hotel are more aligned with the jobs being sought by unemployed people in the area.

Opportunities for career progression and self-improvement

6.10 The previous sections considered how suited the job opportunities would be for local job seekers, depending on whether the Site is used as a hotel or offices, and the types of jobs that local people are looking for. This showed that a hotel use here would be better suited to the local people and therefore more likely to offer job opportunities to those both in need, and living locally. In this section I discuss in more detail how the Appellant is committed to making this hotel an opportunity for local individuals to find work, and progress their careers with the company.

6.11 The Montcalm hotels group is an employer renowned for its investment in staff and its desire to assist staff in working their way up through the company and bettering themselves. For example, the Appellant would have legal obligations to provide 25% of jobs from this hotel to residents of Islington.

6.12 As detailed previously, the Appellant has an existing relationship with the Central Foundation Boys' School, providing support to the hospitality course in the form of both financial contribution and work placement opportunities. The video which has been prepared (appended to the Proof of Evidence of Jamie Brownhill) interviews individuals on the hospitality course, their teachers and the staff who train them in the hotel, and demonstrates the real practical experience that work experience placements at the Montcalm have given to students, giving them insight into what their careers in the

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hospitality industry could hold, and raising their expectations as to what jobs they could get in the future.

6.13 The Appellant provides entry level positions to significant numbers of staff and is committed to fostering job progression and opportunities for self-improvement wherever possible. I now describe a variety of people’s individual experiences with the company, in order to show how they have started at a fairly low level with minimal qualifications and worked their way up through the company. The following paragraphs summarise a selection of employees’ progress during their time with the company:

(a) Kate Iarochevitch, aged 26, joined the Montcalm Group in 2006 as a receptionist at the Best Western Shaftesbury Piccadilly Hotel. Since then she has worked her way up through the Group, eventually settling in the acquisition and planning department where her current position is project manager / assistant to Group Head of Acquisition and Planning. When Kate joined the company she had no formal qualifications, but with the support of the company she completed her BSc in Economics and Finance between 2008 and 2011 and is now studying for an MSc in Surveying while she works (part time distance learning). She is also registered with the RICS and due to sit her Assessment of Professional Competence in the Autumn. Both the MSc and RICS have been sponsored by the company, and the organisation has supported her in her studies through secondments, and study leave. She is an example of how the company enables industrious individuals to work their way up through the company and improve their qualifications and career prospects. Kate says: “When I first joined, I never dreamed I would be where I am today. Throughout my time here I have been taught all aspects of the business and have received all the support I could hope for while I study to further myself and my career.”

(b) Deepak Panicker, aged 30, joined the group in 2007 as a Night Auditor and quickly progressed to a front desk role and became Shift Leader in 2008 and Reception Manager in 2009. He then moved to Montcalm Marble Arch where he is currently a Front Office Manager. Deepak says: “The Group has been amazing and has given me the chance to further my career through training and a fantastic structure of support. My employers bring out the best in me and I hope to continue to progress and repay their faith in me.”

(c) Roberta Monticone, aged 35, joined the company in 2006. She joined the company after completing her NVQ Level 2 in Reception as a Trainee Front office supervisor in Best Western Premier Shaftesbury Kensington. She was promoted as a Front of House Manager in 2008. As part of this she gained new qualifications and was appraised as an outstanding candidate in her initial appraisals. Having moved around roles within the group across a variety of hotels, Roberta was most recently was promoted to Hotel Manager of the Best Western Premier Shaftesbury Kensington, which was the same hotel at which she originally started her career in 2006.

(d) Nema Da Silva, aged 50, joined the company in 2001. She had completed high school and a secretarial course in Portugal and then a variety of secretarial courses in London. She joined the company as an Assistant Reception Manager and by 2013 had been promoted to Cluster General Manager. She has also been

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part of several pre-opening teams, which assist in setting up standard operating procedures for new hotels. These are roles that are given to trusted people who can assist in preparing a new hotel for opening, training staff and trouble- shooting any problems which might arise. Nema is an example of someone who has been with the company for over ten years, has progressed her career with them, and is a hard-working and loyal member of staff.

(e) Lina Lasaite, aged 35, joined the company in 2007 as a Trainee Receptionist. She had attended primary and secondary school in Lithuania and had previously had a career in fashion, with a diploma in Clothes Design and a Training Certificate in Fashion. She wanted a new career and the Montcalm Group offered the environment where she could progress quickly. She was quickly promoted to Shift Leader and Duty Manager and currently holds the role of Deputy Hotel Manager at the Best Western Shaftesbury Piccadilly Hotel. Lina is an example of someone who has successfully worked her way up through roles within a hotel, through solid performance and continuous hard work.

(f) Tarun Bhandari, aged 30, joined the company in August 2008 as a Night Auditor in one of the Appellant's 4 star properties. He was part of the pre- opening team at Montcalm Marble Arch. In 2010, Tarun was promoted as the Night Manager and after successfully managing the night team for a year he was moved to Days as a Duty Manager. After a year of experience as a Duty Manager, in November 2012 Tarun was promoted into his current role as Assistant Front Office Manager. Tarun is an example of how someone can work their way up through the company, gaining experience and improving his career through hard work and dedication.

6.14 Based on my review of these case studies and others, my understanding of the Appellant's ethos and support of a variety of programmes, coupled with the types of jobs available and the types of jobs sought by currently unemployed people in the local area, I believe that the jobs proposed at the Site will offer excellent opportunities for career progression, and better development opportunities for currently unemployed and unskilled workers, than an office development on the Site would.

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7. INDIRECT AND INDUCED IMPACTS

7.1 The three main impacts of developments that we typically consider are direct, indirect and induced. I now briefly explain what each one is:

(a) Direct – these are the jobs that are directly accommodated on site, or created/supported by the proposed investment

(b) Indirect – these are also known as supply chain impacts and can be thought of as the additional inputs that are required for a given company to function and are brought about through business expenditure

(c) Induced – these relate to the changes in incomes of workers that may then go on to be spent elsewhere in the economy

7.2 When evaluating the impact of a scheme it is usual to apply a ‘multiplier’ which captures the indirect and induced impacts. In order to do this fully you must first consider the net number of jobs created, which involves assessing the extent to which any jobs are displaced from elsewhere or involve people commuting in from elsewhere, and then the strength of supply chain linkages and income multiplier that it is appropriate to use. It is then possible to arrive at a set of numbers which are ‘additional’ to the area in question.

7.3 Guidance does not provide much detail on different potential multipliers but it does provide some high level multipliers which are shown in table 7.1 below. These are provided only for a very limited set of ‘intervention types’ – or types of development. The type most comparable to a hotel scheme would be the ‘recreation’ category. The table does suggest that multiplier impacts are stronger in recreation jobs than office jobs.

Table 7.1: Composite multipliers

Intervention type Local area B1 Office 1.29 B2/B8 1.29 Recreation 1.38 Retailing 1.21 Source: English Partnerships Additionality Guide, Oct 2008

7.4 The guidance acknowledges that the use of multipliers is far from ideal as the exact supply chain and induced impacts can vary hugely dependent upon the specifics of the intervention considered. For example an employer who has particular goals to employ local people and to spend as much as possible of their supply chain expenditure within the local area will have a very different type of multiplier impact than a company without such policies. My understanding and experience of Montcalm as a company leads me to believe that they are more likely to have a more locally focussed supply chain impact due to their nature and company ethos. For this reason I base my analysis on the specifics of the Montcalm Group that have been provided to me.

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Supply chain – what do businesses spend locally?

7.5 The Appellant provided me with details of the expenditure that Marble Arch and the Brewery hotels spent with their suppliers. This is commercially sensitive company information that I have examined and analysed and I present the results of this analysis here. I have used the information to estimate my own supply chain impact from the proposed hotel on the Site. I estimate that the amount spent with suppliers is of a similar magnitude to the wage bill of the employees of the hotel, or put another way, that the supply chain will support a similar number of jobs in addition to the direct jobs at the hotel. This would mean a further 200-250 jobs indirectly supported by the hotel.

7.6 As well as details of how much was spent, the Appellant also provided me with the names and addresses of all their suppliers so from this I was able to assess where each supplier is located and how much was spent with them. The table below shows this split across the Study Area, region and nationally.

Table 7.2: Montcalm distribution of supply chain expenditure

Location of supplier Marble Arch Brewery Study Area 15% 13% Rest of Inner London 39% 33% Outer London 10% 12% UK 33% 41% Rest of world 2% 0% Source: Montcalm Group

7.7 I am not able to undertake the same level of detailed analysis for a potential office occupier so instead I use the input-output tables which provide me with details of the industries in which supply chain expenditure is made. I then consider the distribution of these industries across the UK and weight the expenditure accordingly to see what the distribution of supply chain expenditure might be like. This is shown for office employers in the table below. This shows that whilst around 60-65% of supply chain expenditure from Montcalm hotels is within London, for offices more generally this is likely to be only less than a quarter.

Table 7.3: Office sectors’ estimated distribution of supply chain expenditure

Location of supplier Office Study Area 8% Rest of Inner London 9% Outer London 6% UK 77% Source: ONS Input-Output tables, Volterra calculations

7.8 This is unsurprising when you think about the activities of hotels in comparison to offices. Office supply chains involve many things that would be manufactured or served outside of London, whereas a higher proportion of a hotel’s supply chain would be consumables which are more likely to be purchased from closer locations.

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Local expenditure – what do workers and visitors spend locally?

7.9 The traditional way of considering induced impacts is to consider the earnings of workers and what this means for their increased disposable incomes and expenditure patterns. The majority of workers’ incomes are taken home to their place of residence and spent locally. I have already set out in paragraphs 7.6-7.10 that I believe hotel workers are more likely to live locally.

7.10 I now consider the expenditure that would be likely to occur in the local area as a result of the activity associated with a hotel in comparison to an office. In addition to workers spending money each day in the local area (buying coffee, lunch, picking up shopping etc), one of the advantages of having a hotel in this location rather than offices is the additional revenue that will be generated by hotel guests, in the local economy. This particularly applies to corporate guests, who tend to spend a lot more than leisure users.

Hotel visitors’ expenditure

7.11 The ICC Commission report, October 2005, states that business users spend three times the amount that people travelling for leisure purposes do. A study11 by TEAM Tourism Consulting Ltd, commissioned by Cross River Partnership, interviewed 900 business visitors staying at 26 hotels across the Study Area. The Study Area comprised the City, Westminster, Bankside and South Bank areas. It found that, on average, business visitors spent £218 per day. The majority, 62.8 per cent, of this is spent in the hotel the person is staying in. However, the business user still spends £81 per day outside the hotel in restaurants, shops, travel within London and leisure activities.

7.12 This £81 per day expenditure at the time of the study (2005) is equivalent to £97 in 2012 prices. Using this figure and some other assumptions12, it is possible to derive a value for visitor spend that can be expected to be generated from the hotel at the Site. I therefore estimate that by year four, £5.2 million of additional spend will be created by a hotel at the Site. Table 7.4 shows this analysis.

7.13 In any business activity, it takes time to build up to a stable amount of activity and revenue, in the context of a hotel this is because it takes time for visitors to get to know the new hotel and decide to stay there. This is similarly true in office based employment, when buildings often take several years before they are fully let, and firms often take space with a view to expanding so employ fewer people in earlier years and more people in the future. It is therefore standard when considering the potential benefits of any scheme to take a point in time that reflects a stable point in the businesses operation.

11 Source: The importance and leisure potential of independent business visitors to central London, TEAM Tourism Consulting Ltd, September 2006

12 Other assumptions used: hotel occupancy from CBRE estimates for years 1-4; 59 per cent of total roomnight demand is corporate; and average length of stay is 2-3 nights (all figures are derived from CBRE Hotels research). Since the CBRE reserach was published the occupancy rates in Inner London hotels have only continued to rise and therefore if anything it is likely that the occupancy assumptions that we have used may be conservative.

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Table 7.4: Local Expenditure of hotel visitors

2012 prices Year 1 Year 2 Year 3 Year 4 occupancy (%) 73.0 77.0 78.1 79.5 business visitor nights per year 40,245 42,450 43,056 43,828 business visitor spend per night (£) 97 97 97 97 total business visitor spend per year (£) 3,903,727 4,117,630 4,176,453 4,251,319 leisure visitor nights per year 27,967 29,499 29,920 30,457 leisure visitor spend per night (£) 32 32 32 32 total leisure visitor spend (£) 904,253 953,801 967,427 984,769 Total spend (£m) £4.8m £5.1m £5.1m £5.2m Source: Volterra calculations, assumptions derived from CBRE information

Expenditure of hotel v office workers

7.14 Of course, the expenditure of hotel visitors cannot be viewed in isolation because if the Site was developed for an office, then those office workers would also spend money in the local area, as would hotel employees in addition to visitors. In order to derive the appropriate estimates for this, I use a set of standard assumptions about how much workers spend. A YouGov study in 2005 found that on average a worker spent £6 on food and drink in the local area. Uplifting this for inflation and allowing for the higher earnings of London office workers in comparison to average workers across the UK, I estimate that an appropriate expenditure figure for office employees in London is £12.30 per day, and £6.90 per day for hotel workers. Using these figures I estimate that the workforce of an office would spend £2.1m per annum in the local area, in comparison to £355k spent by hotel workers. This is summarised in table 7.5 below.

Table 7.5: Local Expenditure of workers in an office or hotel

Worker expenditure Office Hotel Number of workers 776 233 Expenditure per day £12.3 £6.9 Annual expenditure £2.1m £355k Source: Volterra calculations

Net additional local expenditure related to a hotel

7.15 Combining the estimates of worker expenditure associated with either an office or a hotel, along with the visitor expenditure at a hotel, I estimate that the net additional expenditure in the local area as a result of the hotel would be £3.5m per annum by the fourth year of operation. We focus on the fourth year of operation as this is a reasonable point in time to assume that the office might be fully occupied and the hotel would be operating at a stable rate. £3.5m of expenditure in the local area per year is a very significant level of activity and represents a significant boost to the local area.

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Table 7.6 Net additional local expenditure from a hotel, year four

Local expenditure from hotel guests £5.2m Local expenditure from hotel workers £355k Total gross local expenditure related to hotel £5.6m Local expenditure from office workers (£2.1m) Net additional local expenditure related to a hotel £3.5m

7.16 The following section goes on to consider more widely the importance of hotels in London.

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8. WIDER BENEFITS

London is one of the most popular visitor destinations in the world

8.1 There are a variety of studies and statistics measuring the success of global cities in attracting international visitors. On any of these measures, London is one of the most visited cities in the world.

(a) Total international visitors to London were nearly 15.5 million in 2012 and visitor spend was over £10 billion13. (GLA Economics)

(b) In May 2014 the ONS estimated that London overtook Paris as the most visited city in 2013, with 16.8m visitors and £11.2bn of spending (Paris had 15.7m visitors). (ONS)

(c) In 2012, London hosted a record number of global business events, raising its rank internationally from 17th in 2008 to 6th in 2012 in terms of business tourism14. (London & Partners)

(d) Euromonitor’s top 100 city destination ranking for 2013 puts London 4th after Hong Kong, Singapore and Bangkok. (Euromonitor)

(e) In 2013 54% of all inbound visitor expenditure in the UK was in London. (Visit Britain)

(f) According to the MasterCard Index of Global Destination Cities, July 2014, London regained its position as the top global destination city with 18.69 million international visitors expected to visit London in 201415

8.2 On any of these measures, clearly, tourism is an important part of London’s economy and London is a very large attractor for UK tourism. According to London and Partners16, the Tourism industry contributed approximately £45.5 billion to London’s GDP in 2012, equivalent to 11.6 per cent, and is forecast to increase to approximately £97.4 billion by 2025.

8.3 London appeals to a wide variety of tourist markets, meaning that it attracts high numbers of both international and domestic, and business and leisure visitors. International and business travellers are the most ‘valuable’ as these visitors typically spend more per trip.

8.4 In 2013 an estimated 16.8m international people visited London17 and there were a further 12.3m domestic visitors. The visitor spend associated with the international trips was £11.2bn in comparison to £2.5bn from the domestic visitors, meaning that international visitors accounted for 60% of the trips but 80% of the expenditure, or

13 GLA Economics: Understanding the demand for and supply of visitor accommodation in London to 2036, August 2013 14 London & Partners: “London rises up in world’s business tourism rankings”, May 2013 15 http://online.wsj.com/articles/london-pips-bangkok-as-most-attractive-city-for-visitors-1404897513 16 London and Partners: London Tourism Report 2012/2013 17 Visit Britain

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international visitors spend three times as much as domestic visitors. Furthermore, international visitors on business spend twice as much as those visiting on leisure.

8.5 It is difficult to explicitly define the contribution that hotel provision makes to retaining London’s attractiveness as a world city, but clearly continuing to provide the right accommodation in order to attract visitors is important to London’s visitor economy.

London is also a top business location and its continued success is crucial for the UK

8.6 PWC’s May 2014 Cities Opportunities Index18 lists London as the world leader in terms of economic influence. This study asks PWC employees across 30 cities about their experiences of each city, in areas ranging from ease of commuting through to attractiveness for business location. In 2014 London took the top position for the first time in the six years that the report has been published. The study ranks the cities on ten different indicators. London comes top on the measures of Technology and readiness, City gateway and Economic clout. London’s poorest scores are on Cost and Sustainability.

8.7 London is crucial to the UK economy. It creates 21.6% of UK GVA and accommodates 16.6% of the country’s jobs. Its GVA per capita is £35,640 which is 67% higher than the national average and 59% higher than its next closest region.

Table 8.1: Total GVA and GVA per capita across the country, 2012

total 2012 GVA share of total UK 2012 GVA per Region (£m) (%) capita London 309,339 23% 37,232 North West 130,618 10% 18,438 North East 41,874 3% 16,091 West Midlands 98,346 7% 17,429 East Midlands 79,698 6% 17,448 South West 101,576 7% 19,023 East of England 116,125 9% 19,658 Scotland 106,342 8% 20,013 Wales 47,344 3% 15,401 Northern Ireland 29,410 2% 16,127 Yorkshire and the Humber 93,339 7% 17,556 South East 202,597 15% 23,221 United Kingdom* 1,356,608 100% 21,295 Source: ONS GVA NUTS 3 (*UK less extra-regio & statistical discrepancies19)

8.8 Foreign Direct Investment (FDI) is an important source of investment for cities, as it reflects the attractiveness of the city to inward investment from abroad. In most English regions except London FDI fell in 2013, but it rose in London. In 2013 the UK attracted

18 PWC: Cities of Opportunity 6, 2014 19 This is a standard measure of UK GVA, which excludes statistical discrepancies as well as economic activity that cannot be attributed to a specific region (mainly offshore oil and gas extraction along with the activities of UK embassies and forces overseas.

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20% of all FDI into Europe, the number of projects coming into London rose by 20% and the Capital accounted for nearly half of all UK FDI20.

8.9 In 2013 58% of international visitors coming to the UK were visiting London, accounting for 62% of the expenditure; 50% of business trips into England were to London, accounting for 65% of the expenditure. This highlights the importance of London as an attractor of international and business activity from abroad.

Hotels are crucial to the attractiveness of London to investment and activity

8.10 London is one of the most visited global cities because it has many attributes which make it attractive to a wide range of leisure and business tourists, including:

(a) Heritage (eg Buckingham Palace)

(b) Shopping (eg Oxford Street)

(c) Sporting events (eg Wimbledon)

(d) Business (both business events and visiting on business)

(e) Culture (eg theatre, museums etc)

8.11 London also appeals to the complete range of budgets from back-packers through to luxury visitors. Having the right accommodation to meet the needs of the full range of visitors is crucial to maintaining the city’s attractiveness, competitiveness and continuing to grow its visitor market.

8.12 In a study undertaken by Volterra in 2012 for London & Partners21, to determine the importance of different factors in the ability to sell city breaks to leisure travellers to a variety of global cities, respondents to a survey were asked to rank the relative importance of 9 different factors and Accommodation was ranked as the most important factor, with Transport Connections a close 2nd. However increasing hotel prices in London were cited as deterrents to visitors.

8.13 In the same study, a survey of business visitors asked the importance of different factors in the success of business events, and Quality and Availability of Facilities was ranked 2nd after Travel Accessibility. Respondents were then asked to rank the relative strength of each global city considered against each criteria. London was ranked as the best city on all indicators except Facilities where it ranked 2nd to Singapore. In addition to this, on most measures London and Paris were noticeably ahead of all other cities, but on Facilities, the best city was Singapore and London, Paris and Barcelona were quite similarly positioned. High rates and lack of availability of hotel facilities for block conference bookings at reasonable rates were cited as constraints on growth in business events in London.

20 Ernst & Young 2014 UK Attractiveness Survey

21 Why London? A study on the Return on Investment of different global cities in travel trade, business tourism and FDI, 2012

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8.14 A corporate guest survey undertaken by C&W as part of their 2009 study22 found that proximity to the host office is important (5-10 minutes walk) and that when rooms are unavailable in the City, hotels are chosen for their proximity to the office rather than other factors. The study also found that business visitors typically require 4 or 5 star hotels.

8.15 It is difficult to measure the specific contribution that hotels can have towards attracting visitors, and specifically in attracting business travel, inward investment and economic growth. There are many factors that impact upon growth and it is difficult to extract what level of increased activity could be reliably attributed to a specific intervention or development, such as a hotel. It is clear from numerous reports however that good quality and range of visitor accommodation play an important part in retaining London’s attractiveness to leisure and business visitors.

There is excess demand for hotel rooms in central London

8.16 GLA evidence23 shows that, apart from a dip in 2009/10, tourist nights in London have continued to rise steadily and are projected to continue to do so. This is shown in the purple line in the chart below.

8.17 Alongside this, STR Global data shows that occupancy of central London hotels has risen steadily, from 73% in 2003 to 83% in 2013. This is shown in the blue line in the chart below. Whilst an occupancy rate of 80% may imply to a lay reader that hotels have availability and could be filling their remaining 20% of rooms, in reality an average occupancy rate masks a wider range of characteristics. Hotels operating at 80% capacity will typically be full at some times and less so at other times. An average annual occupancy rate like the one quoted here is averaged across all room rates and types, across the week, and across the year, across the full range of hotels (budget to luxury). This means that one hotel could be full Monday-Thursday and operating at 50% occupancy Fri-Sun, or full in busy months and emptier in others. In reality a hotel can rarely achieve 100% occupancy and 80% reflects a very high occupancy rate meaning that at many times it is in fact full.

8.18 The Appellant provided me with the Brewery’s weekly occupancy statistics for 2014 from January to the end of July. This shows exactly this trend – the average occupancy rate across the year to date is 80%, but on average weekday periods have 10-15% higher occupancy rates than weekends, and 30% of weekday periods have operated at over 90% occupancy, with 10% of weekday periods having occupancy above 95%.

8.19 This is also reflected by PWC’s findings in their March 2014 study: “ADR (Average Daily Rate) strengthened despite continuing supply increases and occupancy remains high, averaging 82% in 2013. The capital is effectively full up at peak times.” PWC, March 201424 (emphasis added).

22 Cushman and Wakefield for the City of London: City of London Hotel Study, June 2009 23 GLA Economics: Understanding the supply and demand of visitor accommodation in London to 2036, August 2013 24 PWC: Room to Grow: European cities hotel forecast for 2014 and 2015. 18 gateway cities, Amsterdam to Zurich, March 2014.

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8.20 The occupancy rate is the number of room nights full divided by the number of available room nights. The numerator (number on the top) of this calculation (number of room nights) is driven by the number of people visiting the city who want to stay overnight. The denominator (number on the bottom) of the calculation (number of available rooms nights) is driven by the number of hotel rooms available in the city. The fact that occupancy rates have continued to rise alongside visitor numbers rising therefore means that the supply of hotel rooms has not kept pace with the demand of visitors to come to and stay in London.

8.21 When there is less of something available than markets want (ie demand exceeds supply), prices rise. For example, if there are 12 people who want to buy a loaf of bread but only 10 loaves of bread available, then a profit maximising shop will keep increasing prices until two people are not willing to pay them and they sell their 10 loaves to create the maximum possible revenue. If it is the case in the context of hotels that demand is exceeding supply, we would therefore expect prices to have risen.

8.22 RevPAR (Revenue per available room) and ADR25 are two respected measures of prices in the hotel industry. ADR is the average rate paid for rooms sold, whereas RevPAR is the average rate achieved per available room – that is to say that RevPAR takes account of occupancy (RevPAR = ADR x occupancy). Both ADR and RevPAR have risen considerably in real terms (ie corrected for general price inflation).

8.23 The change in RevPAR through time is shown in the green line in the chart below. The red line in the chart shows estimated growth in rooms. The fact that real RevPAR, alongside growth in the number of hotel rooms, has risen faster than both occupancy and visitor numbers is evidence of pent up unmet demand - rates have consistently risen faster than occupancy or tourist numbers, because there is not enough supply of rooms to meet the demand, so prices can be increased above the real rate of inflation. Given this evidence, it is reasonable to conclude that some people are priced out of staying within central London altogether, and either do not make the trip or stay in secondary choices of locations.

25 RevPAR and ADR are recognised performance metrics for the hotel industry.

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Figure 8.2 Tourist nights, room supply, occupancy and Real RevPAR, 2003-2013

140

135

130

125 occupancy %

120 Real Revpar tourist nights 115 rooms 110

105

100 20032004200520062007200820092010201120122013

Sources:Occupancy & RevPAR STR Global, Tourist nights GLA and New room supply AM:PM. All series indexed so that 2003 = 100

8.24 This increase in visitors, higher occupancy, and rising rates has all occurred despite a continued delivery of new stock to the hotel market over the same ten year period (shown by the red line in the chart above). Again, based simply upon the numbers and the evidence, it is therefore reasonable to conclude that the amount of new hotels that are being built are not keeping up with demand, and are not relieving the decade (or more) of pent up unmet demand.

8.25 A study considering the relationship between office space and hotels in London was undertaken by Cushman and Wakefield (C&W) in 200926. This study found that a strong correlation (0.92) existed between occupied office space in central London and total business nights in central London – evidence of a strong positive relationship between office activity and hotel business demand. In the City core specifically, the study found that 103 business nights per annum were associated with every 100 sq.m of occupied office space. Furthermore the study estimated that just 11% of total business demand generated by City firms was accommodated by City hotels. This study therefore concludes that office based companies within the City are generating significant demand for hotels which is primarily being met by hotels outside of the City area. The evidence suggests that despite increases in stock in recent years, there is still unmet demand from businesses in the City which could be met by increasing supply in the most demanded areas.

The GLA targets will not remedy this historic undersupply

8.26 The fact that London hotels are in high demand, that there is a strong relationship between economic activity and hotel usage, and that business visitors want high quality

26 Cushman and Wakefield for the City of London: City of London Hotel Study, June 2009

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hotels within easy reach of their place of work, all points towards the importance of there being adequate provision of hotels within the City and surrounding area.

8.27 In order to assist with planning for London’s growth across the whole region and across the boroughs, the GLA sets ‘benchmark targets’ for hotel supply to 2036. The targets contained in the London Plan are underpinned by the analysis undertaken by GLA Economics. As with all targets contained in the London Plan a central figure is presented, but this masks a lot of detailed analysis that underpins it, which typically contains a wide set of scenarios that could occur.

8.28 At a regional level, for the whole of London, the GLA’s analysis estimates the historic amount of visitor accommodation in London, how many people have visited, and how many are projected to continue visiting. It uses this as the basis for a set of central targets for new hotel provision required across the capital. The target is essentially therefore a projection based upon the previous supply of hotel rooms. This means that if the supply of rooms was constrained in the past (as I have shown), then that constraint is being continued into the future by simply projecting based upon the historic data.

8.29 The chart below shows this central projection. The vertical line indicates where the historic data stops and where the future projection starts. This shows that the current position (2013) is at the top of the steeper part of the chart, with the projection for the future reverting to a previous flatter growth trajectory.

Figure 8.3 GLA Growth projections for visitor accommodation in London to 2036

Historic data Future projection

8.30 The GLA’s central scenario (as shown in figure 8.3 above) assumes that the growth in visitors and in turn the required hotel rooms going forward is equal to the average trend from 1991-2010. The report acknowledges however that growth has been stronger than this in recent years, even allowing for and excluding the Olympics effect.

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8.31 The GLA report explicitly acknowledges that this is a conservative set of 'targets': "It is not clear whether the recent level of growth in visitor accommodation will continue. It seems reasonable to assume that at least part of the significant recent growth in rooms has been due to the Olympics. The difficulty is knowing just how much - and, therefore, what the long-run trend for visitor accommodation actually is. It has been assumed here that the long-term trend based on 1991-2010 will be returned to from 2015 and will continue through to 2036. It should be noted that this represents a considerable slowdown from our best estimates of growth in the past decade or so."27 (emphasis added)

8.32 The GLA report presents a range of scenarios, of which the one taken into the London Plan, and shown above, is the central projection. In fact, their highest scenario, based upon the trend from 2002-2010 continuing (i.e. still excluding any Olympics impact) has growth in visitors at 40% above this by 2036. This shows how much variation there could be around these projections.

8.33 The GLA target is disaggregated to borough level. However the GLA report contains several caveats and states continually that this analysis is particularly difficult: “There is a great deal of noise at such a local level.” As such the GLA report makes it clear that the borough numbers should only be viewed as an indication of what the growth in hotel rooms could look like across London: “The figures provided here are intended to provide a general idea of the possible distribution of our estimated overall increase in supply of visitor rooms in London by 2036. The figures should be seen in the context of the total being an estimate itself.” (emphasis added)

8.34 The GLA’s borough level figures are based upon the proportion of hotels each borough has had historically (along with pipeline development from 2012-2015). The table below shows the estimated number of serviced rooms in each borough in 2012 and 2015. It should be noted that the numbers I present here are taken directly from the GLA’s research and are ‘serviced rooms’ which means that they include not just hotels but also B&Bs and serviced apartments, so these figures will be different to estimates of hotel rooms presented by CBRE28.

8.35 Taking a straight average of hotel rooms across the capital shows that in 2015 there would be an estimated 4,468 serviced rooms per borough – Islington’s number, at 3,088 is more than 30% below this. Similarly, when considering growth from 2012-2015, Islington’s growth rate is the 5th lowest of all 33 boroughs.

27 GLA Economics: Understanding the supply and demand of visitor accommodation in London to 2036, August 2013: page 19, paragraph 3 28 It should also be noted that there is not a definitive source for hotel or serviced room numbers so both the GLA and the sources used by CBRE necessarily have to make estimates.

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Figure 8.4 Estimated Serviced Rooms in London boroughs, 2012 and 2015

Borough 2012 Total Serviced 2015 Total Serviced Rooms Rooms Barking & Dagenham 578 796 Barnet 1,217 1,464 Bexley 327 420 Brent 2,402 2,735 Bromley 425 598 Camden 17,584 18,013 City of London 3,836 5,731 Croydon 2,272 2,426 Ealing 1,819 2,214 Enfield 697 697 Greenwich 1,254 1,773 Hackney 761 1,982 Hammersmith & Fulham 3,405 4,328 Haringey 858 941 Harrow 782 985 Havering 854 943 Hillingdon 9,844 10,324 Hounslow 2,847 3,983 Islington 2,949 3,088 Kensington & Chelsea 15,283 15,217 Kingston 951 1,105 Lambeth 3,825 4,946 Lewisham 272 327 Merton 600 703 Newham 4,190 4,702 Redbridge 829 1,051 Richmond 1,593 1,594 Southwark 4,529 5,314 Sutton 248 343 Tower Hamlets 4,802 6,547 Waltham Forest 592 693 Wandsworth 1,126 1,360 Westminster 38,060 40,086 Source: GLA Economics

8.36 I have previously referenced evidence that there is a strong relationship between occupied office space and business hotel demand (para 9.25), and evidence which shows that business tourists prefer to stay close to their place of work (para 9.14).

8.37 Table 8.5 below shows that the Study Area contains 32% of London’s professional employment but only 9% of its serviced rooms (source: GLA). This suggests a

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significant mismatch between the businesses generating much of the demand and the location of hotels.

8.38 This suggests that the Study Area has historically underprovided visitor accommodation, and based on projections which simply continue to project forward these same trends, this will continue to be the case.

8.39 The table below shows the distribution of serviced rooms located in the Study Area, the rest of Inner London, and Outer London, and compares this to where businesses are located. This shows that relative to the location of professional services and businesses generally, there are fewer hotels in the Study Area than are needed to service these businesses. This is not an unexpected finding given the earlier finding (see paragraph 9.25) from the C&W study that hotels within the City only accommodate around 11% of the demand created by businesses in the City – our finding does not suggest that the disparity is as large as this but it does suggest that the City’s hotels do not meet all demand generated from City businesses. Our analysis of the level of demand generated from business activity within the Study Area suggests that businesses within the Study Area generate demand for at least 35,000 serviced rooms, but it only has 12,350, suggesting the current hotels only provide rooms for a third of the demand generated by businesses in the Study Area.

8.40 This is a significant difference and suggests that many business visitors being generated from firms located within the Study Area who would wish to stay locally may not be able to do so and may be staying further afield. By projecting forward hotel provision based upon the existing distribution of hotels across London, this discrepancy between where the demand is generated and where the hotels can accommodate it will only persist.

Table 8.5: Distribution of Serviced rooms, all businesses and professional businesses across London, 2012

Professional Serviced rooms Total employment employment City of London 3% 9% 16% Hackney 1% 2% 2% Islington 2% 4% 6% Tower Hamlets 4% 5% 8% Study Area 9% 20% 32% Rest of Inner London 65% 39% 41% Outer London 26% 40% 27% Total London 100% 100% 100% Source: GLA Economics, BRES

8.41 The following table shows what GLA Economics predict the distribution of serviced rooms will be in 2015, based on continuation of past trends and developments in the pipeline. This shows that all boroughs within the Study Area are forecast to increase their share of serviced rooms, except Islington, whose share falls slightly. This again highlights the lower level of development proposed in this borough.

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Table 8.6: Estimated Distribution of Serviced rooms in 2015

Serviced rooms Serviced rooms 2012 2015 City of London 2.9% 3.9% Hackney 0.6% 1.3% Islington 2.2% 2.1% Tower Hamlets 3.6% 4.4% Study Area 9.4% 11.8% Rest of Inner London 64.8% 62.0% Outer London 25.8% 26.3% Total London 100% 100% Source: GLA Economics

What international money does an office v a hotel bring into London?

8.42 An alternative way of thinking about ‘additionality’ is to consider how much of any activity generated by a development is money brought in from abroad.

8.43 In order to do this and to compare the two options for development of the Site, I considered how much of London’s office employment is typically believed to be the result of FDI, and how much of London’s hotel economy is associated with international visitors and their expenditure when visiting. The table below shows my calculations of how much money associated with either option would therefore come from outside of the UK. I conclude that, per annum, an office on the Site would generate £10.1m of activity through FDI, and a hotel on the Site would attract £14.7m of expenditure from international visitors.

8.44 By thinking about the amount of activity that is generated from abroad, this is a proxy for thinking about the amount of money that is attracted into the UK as a result of a choice of land use.

8.45 I therefore conclude that the hotel would generate 45% more international money than an office use on this Site. I believe this is a very strong reason to support the proposed hotel development here on Finsbury Square.

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Table 8.7 International money from office or hotel on Finsbury Square (per annum)

Impact / assumption Office Impact / assumption Hotel

Number of jobs 776 Total leisure visitor £6.8m expenditure

GVA Value per job (Islington, £100k Total business visitor £12.6m Producer Services) expenditure

Proportion of London jobs that 13% Proportion of leisure / business 80% / are supported by FDI expenditure that is international 74%

Total international value of £10.1m Total international value of £14.7m office on this site hotel on this site

Sources: Job estimates as described in section 6, value per job from DfT’s WebTAG economic dataset on output per worker by sector, FDI proportion from Think London: The Value of FDI to London October 2006, leisure and business visitor expenditure as detailed in section 8, and international proportions as detailed earlier in this section.

Concluding thoughts

8.46 On the basis simply of quantum of employment generated, if a hotel and an office are equally likely to be successful on this Site, then on the methods that we typically evaluate developments, an office at this location would be better because it will generate more employment opportunities. And at the margin, when considering just any individual development site at a time, there is no reason to assume that they wouldn’t be equally successful. However this direction of thought must be incorrect because if it were true then all available land in the area should be offices.

8.47 Let us consider a thought experiment. Assume that all space becomes an office because individually this is always the highest job generating use. This means that there are no hotels, restaurants or other uses and the place becomes unattractive and people leave. Indeed the City used to be much more monocultural and it was less successful. In recent years it has reinvented itself as somewhere more vibrant and exciting, where there are bars, restaurants, hotels and other uses. As a result, the City has become more attractive again.

8.48 We cannot be precise about the individual relationships and decisions that lead to places becoming more or less attractive, as there are many confounding factors, but qualitative evidence tells us that it is true that mixed-use places are more vibrant and more successful.

8.49 Therefore, when considering this site, we need to distinguish between the individual site and the more general case for a hotel in the vicinity. If we accept that a hotel can be a good thing, then this is a highly suitable location.

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Statement of Truth

8.50 The evidence which I have prepared and provide for this appeal reference APP/V5570/A/14/2213312 is true and I confirm that the opinions expressed are my true and professional opinions.

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