Mr. Roedel, III

Development & Construction

Top Challenges of Developing New Hotels in Historic Zones

By Fred B. Roedel, III, Partner & Managing Member, Roedel Companies, LLC

Developing a new hotel property in a historic area presents an exciting opportunity to develop a unique property. It, however, also presents significant challenges that if not kept in mind can become roadblocks to success.

Why would anyone in their right mind choose to take on the extra headaches commonly associated with developing a hotel in a historic zone? The answer is that a properly planned and well-thought out hotel development in a historic zone leads to the creation of a truly unique property that often becomes an important focal point for the surrounding community. Both factors result is a positive economic return for investors.

The development of the Hilton Garden Inn in Manchester, NH, which is located in the historic millyard district of the city, is an example of the successful development of a new hotel in a historic zone. If you are considering developing a property in a historic zone, be sure to address the following.

1. Location

Locating a hotel in the middle of a historically significant area may be interesting, but if your guests cannot easily get there, or the neighborhood is dark and unwelcoming at night, it will not matter how nice you make it, they will not stay there. Never lose focus of the fact that hotel guests must be able to get to your hotel with relative ease and must feel comfortable being at your hotel when they are there.

2. Positive Market Analysis

Understanding what the market will reliably support is critical when it comes to developing a hotel in a historic district because it is not a cookie cutter development. In order to ensure that an opportunity exists for a new hotel property due to reasons such as supply/demand, an unserved market segment, or the general age of the existing supply it is essential to do a thorough analysis of the existing market. Develop Proforma income statements that will allow you to establish your development budget parameters.

3. Site Investigation

Developing in a historic zone means potentially dealing with years of previous users and a higher reliability that unacceptable conditions exist. In today's world, existing environmental conditions have to be dealt with if they are part of a redevelopment so spend the time and money to investigate sub-surface conditions as extensively as possible. Should environmental issues exist, you will need to assess the necessity and/or requirement to protect your firm going forward. The good news is that most states offer programs that facilitate the re-development of environmentally impacted land. The programs can provide the developer protection from existing conditions and involvement in these programs is assuredly the only way a property can be redeveloped and financed. The programs require significant testing, baseline establishment, development and acceptance of remediation plans and development and acceptance of a completion report. This may seem daunting, but the effort should provide a significant return on your investment since you would be establishing the standards by which the property can be developed. Doing so is tremendously valuable, especially in land-constrained areas.

Digging several ten foot or deeper test pits following a sub-surface soil test is a cost effective way to get an idea of what may be under the surface of the land you are considering developing. During one such investigation of a site for a future hotel in a historic millyard, we found 17 concrete structures from a former railroad engine roundhouse lying on top of 2,200 cubic tons of granite boulders, all of which had to be removed.

4. Developing a Highly Reliable Budget

Establishing your performance standards in the areas of time, cost and quality for the project early is key to developing a highly reliable budget that meets return on investment requirements.

Time:

Hotel development within historic zones often takes longer to complete. The reason is that historic areas are important redevelopment areas that are often critical economic elements to a community. This means that more people are involved and that there is always a tremendous amount of scrutiny when it comes to each step in the development process including design and approvals. Be careful not to set unrealistic time expectations.

Cost:

Failure to establish budgetary parameters for the project will inevitably cause you to lose track of your position and result in the economics of the development going upside down. Remember, the market is the market. A well thought out project can have upside potential, but relying on potential to support an undeveloped property can be disastrous.

Quality:

Establish the quality level you expect to achieve with the development. Market analysis is a major element in framing quality standards, but they need to be well thought-out, written down and balanced against your time and costs parameters.

5. Brand Analysis

As with any potential hotel development, you must evaluate available franchise options. In addition to identifying the brands that can take full advantage of the basic market opportunities, it is advisable to identify ones that are flexible enough to accommodate and are prepared to work with you in the design and development of your hotel within a historic zone. Questions to ask when considering a hotel brand include:

• Is there a franchise/brand whose basic designs provide a solid starting point in a design for the location?
• Is the basic building design something that will be a positive compliment to the historic area, or can you modify the design in such a way that it does not contradict the brand's design standards while remaining a positive to the historic area?
• Is there flexibility to accommodate different materials from the prototype?

6. Project Design

One of the greatest challenges of building a hotel within a historic zone is developing a design that compliments the neighborhood without deviating tremendously from a core brand standard and basic operating requirements. Entire buildings do not have to be custom designs to be special. Spend the time to break down all of the areas of the property, public areas, guestrooms, food and beverage, etc. Next, identify the components of the property that if changed, would assist in creating a building that compliments the area, meets the expectations of the municipality and increases the reliability of supporting the revenue and cash flow required for the development.

The potential pitfall when it comes to designing a hotel within a historic district is getting carried away and ultimately overdesigning the project. Never lose track of the core economics that the market can support and always be cognizant of your economic analysis.

7. Governing Authorities and Oversight Commissions

Unlike a project located in an area without historical significance, those in historic areas and zones typically involve extensive interaction with local governing authorities and historic commissions. It is important to identify the potential key influencers of your project and to make them a part of the design and development team. Doing so will result in valuable insight into a municipality's vision, the particular history of an area and information on the success and failures of previous development projects. In addition, these influencers often become key allies in the review and approval process, not only in the community, but also with a brand.

8. Maintaining Flexibility

Unexpected challenges inevitably surface during all hotel development projects. Always be prepared for surprises and ready to quickly make revisions. Developing a solid development team consisting of you, the designers, constructors, operators and the municipality will be invaluable to ensuring a project's time and cost standards will not be heavily impacted by unexpected challenges.

9. Construction

Constructing a hotel in a historic area presents unique challenges. The actual construction process will be the most visible activity to the entire community and it is likely that everyone, particularly neighbors, will have something to say about it. The actions of the constructors will be a direct reflection on the long-term image of the hotel. Do your homework and contract only with firms that are honest, proactive, have an excellent safety record and keep work areas clean of debris. In addition, it is important to develop a construction plan to minimize disruptions to traffic flow etc. Doing so helps maintain community good will.

Successfully developing a hotel property that has a direct association with history and can become a focal point for a community is a very satisfying experience. The additional challenges doing so poses are well worth it.

Mr. Fred Roedel is a Manager of Roedel Companies, LLC along with his brother David. He shares the responsibility of developing and implementing the annual strategic plan of Roedel Companies. He also shares the responsibility of approving the final design, budget and timeline of any asset developed. Mr. Roedel is President of ROK Builders, LLC, the wholly-owned Construction Management subsidiary of Roedel Companies. In this capacity he is responsible for developing the strategic and annual plans of ROK Builders. Mr. Roedel, III can be contacted at 603-654-2040 ext. 105 or FredRoedel@roedelcompanies.com Extended Bio...

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