The UK’s under-utilised shopping centres and office blocks are ripe for ‘experiential’ makeovers, with hospitality investment playing a vital role.
Instead of outright demolition, investors are looking at repurposing, regenerating and converting such real estate into places where visitors and locals want to live, work, and play.
“If you look at the structural changes in the retail and office sectors, we’ve moved away from buying everything on the high street or being in an office five days a week. Now, it’s very much about the experience from a customer’s perspective and an occupier’s perspective. That’s what we’re looking at,” said Louise Burney, operational real estate sector lead, LGIM.
LGIM is aiming to breathe new life into the Dolphin shopping centre in Poole, Dorset, among others, to create a vibrant and inclusive local economy. LGIM has given local businesses street market plots or white box units at no cost for two years, with an option to then take on a permanent space within the shopping centre.
“It’s about giving locals an opportunity without having to pay rent and rates to try out their business and see how it works,” Burney said, adding that LGIM has invested £1bn in regional city centre regeneration projects.
The hotelisation of residential is reflected in build-to-rent developments including gyms, restaurants, bars and coworking, she added.
LGIM has a 50 percent stake in a coworking provider operating in less-affluent communities. “Like we are doing with retail, we have moved away from the ‘this is your fixed rent’ approach, said Burney. “We’ve got management agreements with office users now because we’re looking at how the office use has changed, working together and taking on more of that operational risk.”
For several years, Accor has focused on encouraging locals to use hotel facilities. Philip Lassman, VP development northern Europe, Accor, said that vibrant public areas lead to higher room rates. Hotels can be convenient retail hubs because they are always open, he added, so a nearby dry cleaner might strike a deal with a hotel for customers to pick up their dry cleaning outside normal retail hours.
Accor has created its own branded F&B offers such as Chill08 café bars at Ibis hotels in Canning Town, London; and Cambridge train station. These are popular venues for locals who might be unaware that the cafés are connected to the hotels because they have their own entrances. Such outlets provide an extra 50-60 percent of non-rooms revenue, Lassman said: “It’s making a big difference when you‘ve got interest rates as high as they are.”
“Hotels have got a massive part to play in the regeneration of local areas,” he continued, giving the example of Mama Shelter Shoreditch, which is located further east in the Cambridge Heath area of Hackney: “We’ve started the regeneration of the next area and you see a very vibrant place. The restaurants and bars are busy all the time and new retailers are coming into the town centre.”
Operated by Ennismore (majority-owned by Accor) and opened in 2019, the Hoxton Southwark is in a 13-storey building that includes six floors of coworking space and a rooftop bar and restaurant. Underlining the change in thinking, Lassman commented: “If you were a hotel investor 20 years ago, you would never have thought about having half the building for coworking. But it’s a great way of diversifying the revenues and having a captive audience in-house for the F&B solutions. And the same is true right across the spectrum, from Ibis to Raffles.”
As the owner operator of the Watergate Bay Group (Watergate Bay Hotel, Another Place, and self-catering agency Beach Retreats) CEO Ben Harper said that community engagement and partnerships with residents, businesses, and tourism entities were essential when operating in rural and coastal locations.
“Clearly, we have a responsibility as custodians of beaches and lakes that the local community use. Just this weekend, for example, we staged a free arts festival on Watergate Bay beach and the purpose of that is to showcase local arts troupes, F&B, family entertainment and engage with the local community,” he said.
In late 2022 his company purchased a “relatively run-down bucket and spade hotel on the north Cornwall coast” which will be the site for a new brand launch that will combine lifestyle and aparthotel elements.
Harper explained: “We won’t operate the F&B. We are partnering with a brilliant craft beer and wood fired pizza business that is truly Cornish, truly authentic, with their own community of brand loyalists who will come and spread the word.” Another business will establish a paddle board club within the grounds of the new hotel.
“On the face of it, in pure hotelier terms, some of this stuff might look a bit challenging, like outsourcing all of our F&B,” said Harper. “That's quite an uncomfortable conversation. But this stuff drives room rate, it drives occupancy, it de-seasonalises an otherwise very seasonal business. So, the business case is very clear. You just have to look at different places within the P&L.”
All those quoted in the article appeared on stage at the Annual Hotel Conference held in Manchester between September 11 and 12, in a session called: Live, Work, Play: Building Whole Hospitality Experiences.