Accor's premier budget hotel brand will mark a new era, in its evolution with the brand's first-ever city centre development in Australia.

Formule 1 Melbourne is to be developed out of the historic Old London Hotel in Elizabeth Street (close to the corner of Collins Street).

The development of the seven-storey hotel with 146 rooms will cost a total of $15 million. It is scheduled to open in March 2006 in time for the Melbourne Commonwealth Games. It will be the fourth Formule 1 in the Melbourne area, joining Formule 1 hotels in Fawkner, Dandenong and Melbourne Airport.

The Heritage Council-listed property was originally built in the early 1900s, with a two-storey annex added in the 1930s. The façade of the building, which also houses four retail outlets that will remain operating, will be fully restored to its original condition.

The hotel will target business and leisure travellers wanting a central city location but at economy rates. Nearby hotels typically charge double or even triple the proposed rate of the Formule 1 Melbourne. The rate for the hotel would be typically $89 a night for a room, with ensuite facilities, for up to four guests.

The hotel will offer a range of room types including standard Formule 1 rooms (with a queen bed and over head bunk bed), family rooms (with a queen and double bunk beds) and double rooms.

The Formule 1 will have a breakfast room and vending machines, but no licensed restaurant, as the area is surrounded by numerous all-day dining options.

The hotel is located within the ''entertainment precinct'' of Melbourne, making it an ideal base for visitors going to the city's major theatres, cinemas, restaurants and shopping centres.

Announcing the hotel, Accor Asia Pacific Managing Director, Michael Issenberg, said that the hotel was likely to be one of very few new hotels built in the Melbourne central business district over the remainder of the decade.

''The only sector of the market where Melbourne requires additional rooms is in the economy sector, as there has been significant over-building at the top-end of the market,'' said Mr Issenberg.

''Melbourne experienced a large influx of new rooms and apartment-style accommodation at the start of 2000 and, as a result, occupancies and particularly room rates have been relatively flat in recent years.

''However, with the growth in low-cost air carriers there has been significant increase in demand for budget and economy priced accommodation, and the new Formule 1 will help satisfy that demand.

''It is very rare to get an internationally-branded hotel room in the heart of a city's central business district for under $100, so the opening of the Formule 1 will add significant diversity to Melbourne's hotel sector and encourage an even greater number of visitors to the city.

''We are expecting to build a strong market with business travellers, regional, interstate and international tourists, families, sports fans and locals who want to enjoy a night out in the city.

''Formule 1 now provides the benchmark for quality budget accommodation in Australia, offering affordable prices but with the benefit of a guaranteed level of product. The economy hotel sector has suffered in the past because of variable standards, but Formule 1 is renowned for offering a standardised product that has proven very successful with both the leisure and business markets.''

Formule 1 is one of the fastest growing hotel brands in Australia, located in city and regional areas, close to airports, transport and food outlets. Formule 1 Melbourne will be the 17th Formule 1 to be launched in Australia.

Other Formule 1 hotels set to open over the next year include Perth Airport, and Gosford in NSW.

Formule 1 Melbourne will join a global network of over 650 Formule 1 and ETAP (a related brand) hotels.