Whitbread PLC (LSE:WTB) has splashed out on £200mln plans to develop a Premier Inn hotel just off London's Trafalgar Square.
The FTSE 100 group has acquired the freehold property of 5 The Strand in the centre of the capital, which had been bought four years ago by an Indian property developer intending to create a luxury 200-bedroom hotel.
Subject to planning, it plans to open a 'hub by Premier Inn' concept hotel, which features compact rooms, and a steakhouse restaurant in 2027.
The purchase and development will be funded using existing cash, with the total investment of £200mln in construction, fit-out and other costs.
Chief executive Alison Brittain said the site is "in a prime position and is perfect for the hub brand which is continuing to perform well.
"The purchase reinforces our confidence in the long-term potential of the London market, the hub by Premier Inn brand and the growth prospects of our UK business."
Whitbread already has a significant proportion of future Premier Inn develpements in and around London, while the 'hub by Premier Inn' brand now has 2,431 rooms across major cities.
The concept is designed for locations in major cities where even with high property prices, the smaller room format means it is "able to generate attractive long-term returns whilst providing affordable rooms for guests", the company said.
“Whereas many companies will be battening down the hatches for fear that a recession will hurt their business, Whitbread has done the opposite," said analyst Russ Mould at AJ Bell.
He said the purchase was in "prime tourist territory" and it was interesting how the previous owner intended to create a luxury hotel and "now it’s going to be Whitbread’s latest project in squishing in as many rooms in as possible".