Written by HUGH SULLIVAN for Hastings Independent.
Original article : https://www.hastingsindependentpress.co.uk/articles/news/hotel-costs-soar-but-council-committed/
The construction of a Premier Inn hotel on the former Cornwallis Street car park site owned by Hastings Borough Council (HBC), politically controversial since it was first mooted in 2019, has run into major budgeting problems. A report to cabinet issued by the council’s Chief Executive Jane Hartnell has recommended that its capital programme budget be increased to over £13.6m to fund the development – almost double the budget initially considered, and around £4.6m above the figure suggested in February this year when the cabinet was previewing the programme for the financial year ahead.
After an interruption to negotiations during the onset of the Covid pandemic, HBC concluded an agreement with Whitbread, owners of the Premier Inn brand, in January 2021 under which the council would build the 80-bed hotel complex, then lease it to them for a term of 25 years. The financial details of the contract have never been revealed, the terms being classed as “commercially sensitive”. However, it is clear that the council took on the risk that the building costs might escalate
According to Ms Hartnell, the then cabinet led by Cllr Kim Forward were warned that, once the deal was signed, they would be committed to delivering the hotel building no matter what extra costs might arise. She reports that external advice at the time was that “costs had not increased significantly”, though one might think it should have been apparent by January 2021that this was a likely economic repercussion of the pandemic.
In fact, the pandemic experience seems to have been a determinative factor. Efforts were required, Ms Hartnell recalls, “to ensure the rapid transformation of the town centre and enhancement of its sustainability…The post-pandemic environment made this even more important to do at pace”.
PLANNING AND TENDERING
Planning consent was self-granted in August 2022 against the opposition of both opposition politicians and some local residents. Two initial tender exercises were then undertaken. The first resulted in tenders in excess of the budget and were “not suitable”, according to Ms Hartnell. The second “identified a preferred contractor, with experience of developing to the hotel operator’s specification, but at a cost that exceeds the budget in the capital programme.”
Adding to the costs are updated building regulations, which now require the building to reduce its carbon emissions and incorporate low energy measures.
Ms Hartnell reports that Whitbread have agreed an “improved offer”, including higher rent, a reduced rent-free period and an extension to the build end-date – but of course these don’t mitigate the increase in the council’s upfront costs to be reflected in its capital programme budget. In order to proceed with this, full council approval will need to be secured at its next meeting on 20 September.
POLITICAL OPPOSITION
There’s no doubt that the proposal to increase the budget will run into political flak on that occasion. Tory opposition leader Cllr Andy Patmore used his column in the Hastings Observer last week to castigate the Labour administration for indulging in a risky commercial undertaking rather than using the site and money to build residential homes. Cllr Matthew Beaver, fellow-Conservative, had argued already at the planning committee meeting that the preference for hotel rooms over permanent housing was “absurd”.
Green party leader Cllr Julia Hilton said this week: “Our councillors have spoken out against this hotel since 2021 when I was elected as the first Green councillor. We tried to get it removed from the Corporate Plan in 2022 but were told then that we were contractually obliged to build the hotel, whether it was profitable for the council or not. We have now been told that the council has to approve the additional cost or the council would be in breach of contract and liable to many millions of pounds of damages. This is not a project we feel is in the best interest of the people of the town but we are being pressured by the senior management team to vote for it due to penalties in the contract that they will not disclose and that only Labour are responsible for.”
She also pointed out that Ms Hartnell’s report failed to make any calculation of lost parking revenue “which has been around £100,000 per annum. If this is multiplied by the 25-year lease, that is £2.5 million in lost parking fees that need to be set against any potential income.
“So now the council is hunting round for assets to sell to reduce the borrowing requirement and is selling off two bits of housing land that could have provided 54 homes for social rent. We are told the council can’t afford to borrow the roughly £4 million that would be required to build the homes at Bexhill Road, yet we are committed to borrowing much more than that to build a hotel on a site that was also originally allocated for 20 units of housing including a pocket park and play area.”
CABINET ENTHUSIASM
At the cabinet meeting on Monday night, council leader Paul Barnett refused to be the least discouraged by the increased cost figures disclosed by Ms Hartnell. “I wish to express my delight that this report has come forward”, he said. “What’s changed since 2021 is buildings regulations, and that’s in a good way.” The specification, he argued, is now tougher on carbon emissions and conserves energy better.
He was also pleased that Whitbread had responded positively by improving their offer.
Cllrs Andy Batsford and Maya Evans spoke with equal enthusiasm. Cllr Batsford said: “This about a large hotel chain wanting to be in Hastings – it’s a signal that this is a town to invest in”. Cllr Evans pointed out that the building of the hotel would coincide with the advent of the Garden Town development of adjacent streets as a key feature of the Town Deal investment. “In the next five years we’ll see the town centre dramatically transformed”, she said.
The financial details were not, however, discussed in public session – nor was it clear to what extent they will be disclosed to the full council when the matter is put before them on 20 September.