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I am invited to preview the £35m City Inn Westminster, which packs in some 460 rooms to become the largest new-build hotel in central London. I saunter through the sleek modern facade to arrive on a blazing crimson carpet, from where I am whisked up to a 14th-floor sky lounge for a mesmerising rooftop view of Westminster Abbey and central London. A chat ensues over coffee and pastries with Sandy and David Orr, father-and-son founders of the newcomer hotel chain City Inn, and Rab Bennetts, architect for this, their flagship hotel.

Anticipating a spiel about this hotel chain's product, I am instead treated to a eulogy on architectural excellence. "We didn't want just hotel architecture; we wanted brilliant urban architecture with natural, unfussy interiors. I have an obsession with good orientation, natural light, fresh air, good acoustics." Significantly, this is David Orr speaking, while Rab Bennetts nods sagely on the other side of the table. "The whole approach is to make the building as permeable as possible," he adds cryptically.

Eventually Bennetts chips in: "So many hotels are designed from the outside to please the planners, and inside they're fitted out in wall-to-wall kitsch. We haven't taken that approach."

I'm left in no doubt, then, that City Inn Westminster is not just a big, new shiny hotel – it offers quality architecture too. This is a four-star hotel tucked in just behind Tate Britain that charges £215 a night, putting it in a similar price bracket to Malmaison, Hilton and Sofitel. In its cool modern architectural image, however, it has the exclusive boutique hotels, such as Hempel and Shraeger, in its sights.

In that case, why not go direct to recognised style kings, such as Philippe Starck, rather than an architect with a reputation for energy-efficient buildings but no track record in hotel design? The answer, it turns out, is that Bennetts Associates has turned its formidable skills to rationalising architectural and engineering forms of this already standardised building type, while also "Eganising", as Rab Bennetts puts it, the construction process. And, what's more, enhancing the architectural effects at the same time.

In true Egan fashion, so Bennetts claims, his practice has managed to shave 30% off the project cost. Allowing for a little architectural licence, the 14-storey building in central London was built for the economic cost of £1600/m², or £76,000 per room, including fit-out and fees.

Several ploys have been adopted to keep costs down and, wherever possible, architectural quality up. This immediately becomes evident when we visit a standard bedroom, which is, let's just say, on the compact side. The bedroom with en-suite bathroom measures just 3.2 m in width and 21 m² in area, closer to the current space standards of a budget hotel – the current norm for four-star hotels is more like 28 m².

To make the best use of limited area in the bedrooms, considerable effort has been put into ergonomic design, according to David Orr. One unusual result is that the main fitted closet unit, containing wardrobe, drawers, dressing table, shelving and hi-fi set, is set against the external wall. As well as leaving a comfortable-sized seating area between the closet and the bed, this arrangement cuts down on external window space – an expensive item. That said, there's no lack of daylight or views, as a floor-to-ceiling window fills up the rest of the external wall.

The second piece in Bennetts' armoury of rationalised design and construction was tunnel-form construction, in what Bennetts claims was the largest application in Europe. The Dutch proprietary system of reusable shuttering was used to cast a structural egg-crate of walls and floors in insitu reinforced concrete. The solid concrete walls and floors between bedrooms come with intrinsic sound insulation and have been simply and cleanly finished in a skim coat of plaster and white paint. Dispensing with suspended ceilings allowed two extra floors to be fitted into the building, which rises to roughly the same height as its neighbours.

Next we visit the ground and first floors, which are given over to communal spaces. As well as the main foyer and hotel reception, these include a 200-seat restaurant at the back and a cocktail bar on the first floor. Both restaurant and bar have been set up as stand-alone money-spinners with their own names, City Cafe and Millbank Lounge respectively, flash modern decor and gourmet food prepared by top-flight West End chefs. To appeal to non-residents, they are highly visible through clear-glazed window walls to the street and are served by their own separate entrances. David Orr's concept of permeability now starts to become clear.

Despite hip interior design by Proof Consultancy, these expansive communal spaces demonstrate the primacy of the basic building design over fitting out. The insitu egg-crate structure of the upper bedroom floors has been allowed to barrel down through the bar, foyer and restaurant in the form of rows of plain cylindrical columns of solid reinforced concrete at 3.3 m centres. Both the architect and structural engineer Blyth & Blyth can no doubt take pride in the straightforward honesty with which the structural system is carried through and visually expressed. Significantly, though, these phalanxes of columns have not been allowed to compromise the communal spaces through which they march. Instead, they have been imaginatively mobilised to subdivide these large halls into more intimate spaces of varying character.

Understandably, putting 460 bedrooms on to a city centre site was an architectural challenge in its own right. The site was a small polygonal infill plot that had lain empty as a surface car park and was hemmed in by 15-storey blocks on all sides. Of various configurations considered, Bennetts opted for a straightforward T-shaped plan, with a 14-storey slab fronting John Islip Street and another 14-storey slab stretching out behind it. However, the irregular site boundaries prevented the two slabs from meeting at right angles. This geometric problem was solved by inserting the central lift and stair tower between both slabs so that it would act as a knuckle, allowing the rear slab to be cranked round to one side to fit the site without looking awkward.

The double tower block is simply but elegantly modelled and crisply detailed, as would be expected from Bennetts. The gable walls are clad in the material of the moment – hanging terracotta tiles – but instead of the clichéd self-finish, Bennetts has opted for bright indigo glazing.

The plant rooms are housed on the top floor, but these are all but hidden by being set back from the facade and topped by a canopy of louvres that cantilevers outwards, giving shade to the window walls below. This arrangement gives the building a satisfyingly distinct lid on the skyline, while the bright blue colouring helps it stand out from the dreary grey crowd of towers surrounding it.

Finally I am taken to visit the "Art Street", into which David and Sandy Orr have sunk £500,000 as the hotel's pièce de résistance. Though not an established public right of way, this is a 80 m long pavement-level passageway that invites passers-by to nip through the site between the public streets at front and back. The prime creator of the Art Street was the artist Susanna Heron, who worked closely with Bennetts Associates. The result of the collaboration comprises a half-glazed roof, free-standing cylindrical columns that mimic the real ones inside the building, and a side wall of dark slate panels adorned with abstract motifs alternating with white-concrete panels.

The inventive Art Street, I have to admit, left me cold. Although not at all draughty, its hemmed-in setting between two tower blocks and its stark decor made it feel like a wind tunnel. In fact, the altruistic civic aspect of the Art Street impressed me less than the crafty commercial intention underpinning it. What the Art Street does very effectively is increase the street frontage of the restaurant. Non-residents using it as a short cut to the river pass at close quarters along the whole depth of the City Cafe, and in summer brush past the al-fresco tables that spill out from it. If this does not beguile them to tarry and sample the refreshments on offer, not much will.

So this is what David Orr means by a permeable building. Not just a quality of refreshingly crisp, understated, functionally honest contemporary architecture, it signifies a building that pulls unsuspecting punters off the street at one end and out at the other. It gives commercial architecture a whole new meaning.