A budget hotel to be built at the foot of Constitution Hill in Birmingham was yesterday described by civic leaders as another 'vital cog' in the city's regeneration.

At Team Birmingham's launch event at MIPIM, developer Harry Kenth announced his company, Great Hampton Hotels, had signed a letter of intent to build a £10 million 84-bedroom hotel.

Great Hampton Hotels is a new division of the Great Hampton Group and Mr Kenth said it was hoped the hotel - called Hampton by Hilton - was the first of a number to make best use of inner city regeneration opportunities.

The decision to commit was welcomed by Coun Mike Whitby, leader of Birmingham City Council, who said such schemes were a vital part of the transformation the city was undergoing.

"The city needs balance and a good supply of budget accommodation. Harry Kenth and his team are to be congratulated in their persistence over two years to bring this to fruition," he said.

Clive Dutton, city head of regeneration, said: "Harry's innovative approach to an old building on an old site will kick-start the regeneration of the Snow Hill corridor up Constitution Hill along the A41."

Mr Kenth said: "This is the culmination of two years' hard work and it was extremely heartening to be congratulated by Birmingham planners on what they regarded as an excellent scheme," he said.

He said he particularly welcomed the cooperation and support of Centro. Great Hampton Hotels has signed a Section 106 agreement to build a bridge link at the rear of the proposed hotel to help commuters access the St Paul's Metro stop from St Paul's Square.

The development is particularly poignant for Harry Kenth as it was his father, Sohan Lal Kenth, who first bought the former clothing factory and warehouse premises in 1980.

"The Kentex factory was part of our family's life and business but most of us have now moved on from the textile industry. We were keen to bring this site back to life as we are very keen on regeneration and the hotel will create many new jobs in Hockley district.

"The hotel will have an underground car park and be accessible from the city centre and the nearby motorway network," he said.

Great Hampton Hotels is the leisure arm of Great Hampton Group. The residential division, Great Hampton Homes, was last year commended for a Willenhall development named Best Urban Renewal Project in the inaugural Variety Club Midlands Property Awards.

Great Hampton Hotels' proposal preserves the locally listed building fronting Constitution Hill, converting it into an attractive reception area with a bar and restaurant at ground floor visible from the street. The upper floors will house bedrooms.

The existing dilapidated rear buildings will be demolished for a contemporary four-storey wing building which will house bedrooms. This will be separated from the listed building by a colourful landscaped courtyard with glass staircase.