New Hotel in Wellington, New Zealand: A Feasibility Study

• Introduction

Property re-development is a complex process. To relocate a business activity from an existing location or instate a new business on an existing property requires careful site (re)selection based on informed market research, long planning based on in-depth analysis of different stakeholder needs, proper consideration of local, national and international laws, bylaws and regulations and, more recently, energy efficiency and sustainability practices. Indeed, if business relocation for relocation reasons is a long and complex process, hospitality in particular requires even more market research and development planning. This can be justified by how image is critical in hospitality in general. For current purposes, a detailed analysis of a location’s viability as a hotel instead of a business building is offered. More specifically, a location – on 61 Molesworth St Wellington City CBD, New Zealand – has been until recently occupied by a 90-storey business building housing business offices and shops has been demolished by Wellington City Council after an 8-magnitude earthquake (Swinnen, 2016).

The specified location is recommended as a “prime” site for another business activity namely, a hotel. In order to better assess how viable selected location is, a closer examination is required of different business and market factors. More specifically, current location of 61 Molesworth St Wellington City CBD, New Zealand is assessed as a viable location for a new hotel to serve central Wellington and beyond. The current assessment assumes a feasibility report form and accounts for market, design, legislation and energy sustainability requirements. This feasibility report aims, hence, to assess viability of 61 Molesworth St Wellington City CBD, New Zealand location as a property site for a proposed new hotel serving central Wellington and beyond.

This report is made up of five sections in addition to Introduction: (1) Project Description & Location Selection, (2) Design Trends & Stakeholder Needs, (3) Legislation, (4) Sustainability & Energy Efficiency Practices and (5) Conclusion. The “Project Description & Location Selection” section offers a broad overview over proposed business project and location selection process. The “Design Trends & Stakeholder Needs” section considers for different local, national and international design trends based on different stakeholder needs. The “Legislation” section discusses existing and possible permits, laws, bylaws and regulations required to start a new hotel in specified location. The “Sustainability & Energy Efficiency Practices” section offers a brief presentation on optimum energy sustainability options which could be adopted for proposed hotel project. The “Conclusion” section wraps up main points in current report and offers further insights and recommendations.

• Project Description & Location Selection

Wellington, New Zealand’s capital, is home of country’s main political, legislative and business entities. As such, Wellington is, from a development perspective, a prime location for different business activities. The address – 61 Molesworth St Wellington City CBD, New Zealand – mentioned above is located in central Wellington, a business-oriented location which assumed even more business viability after city’s most recent earthquake. The Wellington Region is, for example, home to 177,165 and 651 private and non-private dwellings, respectively (“Population and Dwellings,” n.d.). This combination of commercial and residential dwellings makes Wellington Region in general and city’s center in particular, a viable location for different business activities, including hospitality. Moreover, Wellington City Council has, in more recent years, introduced a number of development projects and city planning proposals which are apt to make central Wellington – and, for that matter, Wellington in general –  an increasingly viable area for a hospitality prime project. For example, Wellington City Council has as main objectives: (1) ensuring quality of housing (more homes, around 21,400 by 2043), (2) accommodating different housing needs and preferences, (3) ensuring accessibility to city’s centers and public transport, and (4) high quality local facilities, businesses and services (“Housing Choice & Town Centre Planning,” n.d.).

As part of city renovation and accessibility plans, Wellington City Council has also partnered with different local and national public and private contractors in order to make cycling safer and easier (“Cycleways,” n.d.). If anything, cycling has not only become an increasingly popular form of transport, particularly in metropolitan areas, but h\as also reshaped how businesses offer different services to customers now moving “slower” and staying longer. This pattern is particularly interesting for hospitality companies which would be able to use existing environmentally-friendly infrastructure developed by public authorities and private investors in order to enhance an image of sustainability and healthy accommodation. (This sustainability aspect is discussed in further detail under “Sustainability & Energy Efficiency Practices” section.)

As matters stand, apartment and motel accommodations are most common hospitality property offerings in Wellington (“Wellington City Accommodation,” n.d.). These property offerings – which cater for short-stay needs, combined by a notable shortage in hotels in central Wellington and on 61 Molesworth St. (Harris, 2016) – represent a substantial business opportunity for a hotel project on location in question. The business model upon which current proposed hotel project is based should, however, combine best practices in conventional and peer-to-peer accommodation offerings. More specifically, while conventional hotels offer credibility (but lack innovation in, for example, payment and custom accommodation), peer-to-peer offerings – including, most primarily, offerings on Airbnb and Wimdu – offer convenience and custom accommodation options. Thus, a hotel on 61 Molesworth St. should combine brand credibility (partly built over years and partly based on service quality and innovation) and custom offerings, including for accommodation.

III. Design Trends & Stakeholder Needs

The hotel industry is undergoing major changes in design concepts. Informed by changing accommodation and, more generally, traveling patterns, room and hotel space design is now catering to different needs. If anything, Millennials are now a growing force in different industries, including hospitality. Traveling more, spending less and tech-savvy, Millennials are changing how rooms and hotel space are designed. For current focus, business, Millennials and Chinese represent main potential customers for a proposed hotel on 61 Molesworth St. Given location of proposed hotel, business customers should be one main customer segment whose needs should be reflected in room and hotel space design. The Chinese customers, particularly middle class, are increasingly becoming a global consumption force and are, accordingly, expected to be a sizeable segment of proposed hotel, since Chinese are, after all, not unfamiliar with Australasia, including New Zealand. In order to cater for what appears to be extremely different customer segments, a proper balance should be struck between luxury, mobility and technology. More specifically, growing mobility of travelers, service outsourcing, awareness of environmental footprint, web experience and, not least, technology are all shaping how design should cater for apparently conflicting needs (Copolov & Eastwood, 2013). This shift in design concepts is reflected at national, i.e. New Zealand, and international levels.

Nationally, design concepts are increasingly balancing out luxury, homeliness and smallness (Butler, 2017). More specifically, room space, in contrast to more conventional one, is becoming smaller in size (“boutique”) and incorporates more home-like furniture elements with enhanced luxury in more futuristic style.

Figure 1. Trends in room design. This figure showcases components of luxury, homeliness and smallness in New Zealand hotel industry. (“Untitled Image of Hotel Room,” n.d.)

Globally, micro-hotels are becoming increasingly mainstream in hotel design. To cater for more dynamic travelers, particularly Millennials, hotel chains, big name brands and budget ones alike, are re-sizing room space into smaller areas, as small as 15 m2, and expanding on public spaces, outside rooms, for more social activities (Trejos, 2015). This shift in design concept is particularly consistent with recent developments introduced or planned by Wellington City Council to make public space more cycler and walker friendly and is apt to boost proposed hotel’s image as particularly sustainable, as is discussed in further detail under “Sustainability & Energy Efficiency Practices” section.

• Legislation

Needless to say, legal requirements for new buildings, for business, residential and/or mixed use cannot be overemphasized. The recent deconstruction process, managed by Wellington City Council (“Wellington City Council takes over, 2016) and fines applied to demolished building’s owner, PrimeProperty for illegally renting out residential units in a business building (Stewart, 2017) highlight how critical is legal considerations for new property development. In Wellington, specific legal requirements and building consents should be considered during hotel building planning process.

The Wellington City Council offers detailed information on all required consents, licenses and fees. One very first step in building a hotel on location in question is to ensure whether a building consent is required or not (“Before You Start Your Project,” n.d.). The consent, if required, ensures that a certain building meets a number of standards, including safety, set out in Building Act 2004. Moreover, pre-application meetings are required in case of complex projects of over $2 million (“Pre-Application Meetings,” n.d.), a requirement which might be applicable in current case. For specific consents and licenses, Wellington City council offers detailed information for each consent and license required for different commercial and residential buildings (“Consents & Licenses,” n.d.). Of particular interest are licenses and consents for alcohol (under Sale and Supply of Alcohol Act 2012), food safety, gambling, road stopping, signs and posters, and resources. In current phase, one cannot, in fact, draw specific plans in so far as legislation is concerned. This is justified, primarily, by lack of adequate financial information which should inform a decision of whether a pre-application meeting is required or not and since pre-application meetings, according to current regulation in Wellington n City Council, require an estimated budget of over $2 million, one cannot proceed to propose to next phase, i.e. application process, without more specific financial information on project’s overall costs, let alone information about facility construction and design specifications.

• Sustainability & Energy Efficiency Practices

The case for sustainability in business cannot be overemphasized. Indeed, organizations, for profit or not, are increasingly adopting sustainability as an integral strategy within overall business strategy. Admittedly, while environment stewardship and carbon foot print are at forefront of current efforts to internalize sustainability into business process, additional (but no less important) innovations are adopted across industries beyond carbon footprint.

Energy generation and consumption is one most important area in which sustainability can be said to be making major strides. One notable innovation in energy sustainability is one which is adopted by Amazon. More specifically, Amazon has introduced a new heating system into company’s new campus in Seattle by which heat is captured from a neighboring non-Amazon data center and is recycled in company’s underground water pipes (“Recycling Energy,” n.d.). Amazon’s innovation is shown to be four times as efficient compared to conventional heating methods, cut back on energy consumption and, not least, is less costly. Interestingly, Amazon’s innovation is a collaborative effort between Amazon, Clise Properties, McKinstry and City of Seattle. This innovation can be adopted in proposed hotel and can, in fact, be just as collaborative as in Amazon’s case, particularly in light of proactive attitude of current members of Wellington City Council.

• Conclusion

To wrap up, central Wellington is a prime location for different business activity, including hotels. The undergoing and future development projects, shortage of hotels and business opportunities created by recent earthquake – all combine to make a hotel project on 61 Molesworth St an increasingly viable business option. The general designs trends in New Zealand and globally are increasingly inclined to smaller size, more luxury and technology in room space and more space in public areas outside rooms. The estimated cost of proposed hotel project is critical in order to decide whether pre-application meetings are required or not, meetings based on which project owners should proceed to application phase. For sustainability, energy recycling is probably one most interesting trend and is apt to energy production and consumption efficiencies, save costs and enhance environmental record. Finally, project owners are recommended to combine space design requirements, adopt energy-efficient practices and further customize accommodation experience by combining best practices in conventional and peer-to-peer accommodation offerings.