STOCKTON-on-Tees Borough Council has reiterated that its proposal to bring a 125-bed Hampton by Hilton hotel to Stockton is based on a “rock solid” business case backed by industry experts.
The proposal, due to be considered at June’s full Council meeting, would see the Council borrow up to £17million to develop the hotel on the former dairy site on Bishop Street.
But projections forecast the Council would receive net operating profits of £1.2million per year, which would more than cover the estimated £830,000 per year required to pay back the borrowing over 35 years.
Council Leader, Councillor Bob Cook, said: “This proposal is founded on a rock solid business case that has been subject to due diligence and validated by industry experts CBRE and Hotel Valuation Services, two of the world’s leading firms in the commercial property and hotel market.
“All expert projections point to an occupancy rate of more than 80 per cent, which would generate healthy annual profits on our investment, and a significantly lower occupancy rate than that projected would still see us break even. To put this into context, midweek occupancy rates at similar hotels across the Tees Valley are currently at 95 per cent and there is evidence of growing corporate demand.
“Equally important are the wider benefits. The proposed hotel is a key part of our plans for the regeneration of Stockton town centre and an economic impact assessment estimates this kind of internationally renowned hotel would be a huge asset, bringing in £6.7million per year into the local economy and creating around 100 jobs for local people.
“Year after year this council wins praise from auditors for our careful use of public money. We have a strong track record of sound financial management and what we are proposing is another smart investment with huge economic benefits.”
Councillor Cook added: “What has become clear since announcing this proposal is that we have a job to do to help people understand that we effectively manage two main budget streams – our capital investment programme and our revenue budget.
“I can understand why we get asked questions such as ‘how can you borrow money for a hotel while proposing to close two libraries?’ Well, what we are talking about for the hotel proposal is capital spending.
“Capital spending cannot be used to fund staffing or day-to-day services, but it can be used as one-off spending on physical regeneration projects with lasting benefits, such as the proposed hotel, the leisure centre planned for Ingleby Barwick, or our investment in Yarm Library.
“Alongside this kind of investment in buildings – and this is where people perceive the contradiction – we are having to manage huge Government reductions to our revenue funding, which covers the cost of running day-to-day services.
“These cuts have left us with no choice but to review front line services, like libraries, that are greatly valued by our residents. This is a painful process and one which we are undertaking with the utmost care and sensitivity.
“We know that these are incredibly tough economic times, but we have been absolutely clear throughout that we remain ambitious for the Borough and that Stockton-on-Tees is very much open for business.
“It is more important than ever that we target capital investment on projects that provide facilities and opportunities for future generations, and one of the benefits of the hotel proposal is that any profits generated can actually be reinvested into council services.”