Jan. 14, 2005 - With his two brothers, he runs an industrial conglomerate with annual sales of 600 million pounds. His father is a Labour peer and one of the most successful Indian businessmen of his generation. His extended family is a regular fixture in the newspaper rich lists thanks to its investments in steel and engineering. So why is Ambar Paul, son of Caparo empire founder Lord Paul of Marylebone, investing time and money starting up a chain of boutique hotels?

Having bought two somewhat tired sleeperies in Oxfordshire and Lincoln from the Macdonald hotels chain for almost 6 million pounds last year, he is about to start creating a luxury venue in the heart of the City. The hotel is situated in grandiose former bank buildings opposite Deutsche Bank near London Wall, and rooms will cost about 250 pounds a night, with suites at 450 pounds. That pitches it between its two rivals in the Square Mile, Sir Terence Conran's Great Eastern and the Eton Group's Threadneedles.

Hoteliers in the capital are still reeling from some of the worst trading years in living memory but Paul, a lean, engaging 47-year-old, sees big money to be made. However, he cites the high entry costs of getting into the business and the need for expertise. "Hotels are the only business in this country I could think of that foreign competitors could not flood into," he says.

He admits that, at a time when the InterContinentals and Whitbreads of this world are selling their property assets to focus on managing hotels rather than owning them, his strategy of buying sites runs counter to the trend. But he is undaunted, offering the example of steel billionaire Laksmi Mittal -- with whom he is well enough acquainted to receive an invitation to the annual Mittal Diwali party. "Most people make their money from unfashionable views," he says. "Look at Mittal -- everyone thought he was mad when he started buying up steel mills."

But his main purpose appears to be a love of travel, hotels and restaurants. He is convinced that Britain's position between continental Europe and the US will attract visitors from Asia and America, as well as having a potentially strong domestic tourism market.

"But we need to upgrade to bring in new customers," he says. "So I decided let's create a new concept of hotels -- lifestyle, boutique hotels that are more affordable than the likes of One Aldwych [the stylish West End hotel beloved of celebs and media types]."

His provincial hotels will be aimed at 25- to 45-year-olds and their families at the weekend and senior executives during the week. Design will be contemporary but prices will be non-scary -- between 100 pounds and 120 pounds a night. All will be separately branded under the umbrella of Contemporary Hotels.

Paul grew up working in a hotel owned by the family in Calcutta when he was home on holiday from Harrow. He ran the reception and sold nick-nacks, and still cites those days as being among his most treasured memories.

In a varied career under the tutelage of his father, he has run a host of family businesses in the Caparo conglomerate, ranging from tea plantations to shipping and engineering companies. His main job is now running the large American steel tubes business although he, his brothers and their parents live with their families in modern apartments in London's Portland Place. Hotels may have sparked the imagination of the enthusiastic Paul but his brothers were less enthusiastic. His twin Akash -- in charge of UK steel -- and Angad, 34, run Caparo with him in a triumvirate. Father Lord Paul looks on as chairman.

Akash and Angad did not want the company further exposed to the hotel market by the London project. This could have been the start of a fraternal row but over the decades the Paul dynasty has worked out how to smooth over such disagreements.

"We decided each of us can spend some time independently in the area he wants. We do not always see eye to eye, and my brothers did not want to invest further in hotels. So we had a family meeting and decided if I really wanted to do it, then I should do it on my own," he says. He has taken out what he describes as a loan from Caparo but remains the only shareholder in the venture.

It is not the first time Paul has looked at getting into the London hotel market. He offered to buy Threadneedles four years ago for 26 million pounds but was turned down. Owner Eton wanted 40 million pounds, he claims. Compared with that, he will pick up his City hotel for a snip -- 17.5 million pounds including the price of acquiring the building. For that he will get 75 rooms, a top-notch Asian fusion restaurant and trendy round bar, which he hopes will bring in the City boys and girls as well as the guests.

Doubters point out that Paul is moving into a City that is seeing companies migrate to Docklands en masse. They question whether, in the long term, he will be able to fill his hotel with visiting executives during the crucial Monday-to-Thursday earning nights.

Also, while the Corporation of London sped along planning permission in its enthusiasm to get more tourists into the Square Mile at weekends, can Paul really expect to pull in many leisure guests? He says he will, but his business plan does not rely on them. "I think we can make money at five days a week with under 75 percent occupancy," he says.

Hotel analysts point out that, despite the rising number of office developments in Canary Wharf, many overseas visitors still prefer to stay closer to the West End. The City marks a fairly convenient halfway point between Docklands and Theatreland, they say.

Paul says he is also looking for a hotel site in the West End as he seeks to expand his new business. "I want three more hotels in the UK, maybe more, then some in France and Italy. They are the two countries I love most in Europe to visit," he adds.

After that, he sees opportunities to expand into India, which he views as a major growth area for UK tourism. The British and Indian governments' decision to double the number of flights to India from Heathrow will also see more Indian tourists coming to Britain.

Who knows, the millionaire steel tycoon could soon be back behind the reception desk in a Calcutta hotel. Except this time, it will be his, and no one else's.

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