Fears new 400-bed hotel could be 'white elephant' for council

The council is set to take out a 25-year-lease.

An artist's impression of redevelopment at the West Approach Road

Concerns have been raised that a major city centre hotel development may prove to be a ‘white elephant’ for Edinburgh City Council in the wake of the Covid-19 pandemic.

Plans for the Edinburgh International Conference Centre to open its own hotel and hotel school at Haymarket were approved by Edinburgh City Council in early March.

The council is set to take a 25-year lease on the hotel and sub-lease it to the EICC, with the building work, carried out by developers Quartermile, financed by an international pension fund.

The four-star 365-bedroom hotel will be operated by the EICC under a franchise with hotel supply and development firm STR.

But Green councillor Gavin Corbett has called for the development to be paused over concerns it pulls the council into undue risk as the hotel and business tourism industries come out of the Covid-19 pandemic.

“We’re in a position now where business tourism, and all tourism, is at an all time low,” he said.

“We don’t know the extent to which that will recover, or even if it will recover, and at the very least we should be pressing pause on that development and that lease because of that risk and uncertainty.

“If the hotel turns out to be a white elephant then the council is stuck with a 25-year lease and potentially a massive loss-maker.”

In an amendment submitted to the Finance and Resources Committee last week, Cllr Corbett called for the council to withdraw its approval of the project and reconsider alternative plans.

The amendment was rejected, and the development will continue. There has been a gateway review of the project which concluded that it should proceed, and another review will be undertaken in October.

Marshall Dallas, Chief Executive of the EICC, said he expects that hotel use will have returned to previous levels by the time the hotel is set to open in 2023.

“It's anticipated that hotel occupancies and revenues will have nearly returned to pre-pandemic levels by the end of 2021 with a full recovery being achieved in early 2022,” he said.

“Given these assessments, we do not believe that the development of the Haymarket hotel, which is not due to open until the end of 2023, or the beginning of 2024, should be affected.”

He added: “It's right to pause and reflect and I think the officers of the council have already done that in terms of the gateway review document which the conclusions were that they should proceed with matters.

“I think there is another gateway review planned for October, just to see where things sit with that. And it's right to do that, but I do believe that it's important to continue down this path because [...] from what our consultants are telling us the business case is still robust.”

Cllr Corbett also argued against the project in March, saying that it was too risky to assume that tourism and business tourism would continue in the same way for the next 25 years.

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