Ms. Watson

Furniture, Fixtures & Equipment

Renovate Smart: A Tactical Approach to Savings

By Julia Watson, Project Director / Sr. VP of Business Development, FARROW Commercial, Inc.

Hoteliers are in the business of, well, hotels; the real estate, ownership, operations, RevPAR, ADR, etc. So when it comes to renovations, and the hotelier’s business suddenly changes to construction, a lack of experience can quickly result in unnecessary expenses. Successfully managing the upgrades-to or the conversion-of a hospitality property can be the difference between spending excess dollars and putting money back in your pocket. Understanding some basic principles in hospitality construction and contractor selection can make a difference in the overall price of the project. These steps are inclusive of deciphering between using a national versus local provider, understanding the importance of selecting a hospitality-specific contractor, using a turn-key operation, ensuring the contractor can perform to the schedule requirements without compromising budget and quality standards, and effectively executing the project from bid to completion.

One common misconception in hotel renovations that can make a difference in the cost of construction is hiring a local provider as opposed to a national one. Common sense would tell most anyone to hire a contractor at the local level; where the project is located. In many cases this may equate to savings for housing of crews, as tradesmen who are locally based are able to go home nightly. However, it is always advisable to entertain the idea of using a (licensed) national general contractor who has regional offices in various parts of the country or whose sub-trades and crews travel. Often times, when crews do not have the luxury of their own home to retreat to, they are more driven and work harder to complete the project. The psychology of local forces can differ from that of traveling crews and the project may extend for a longer construction cycle, resulting in lost revenue. This is not always the case, but being aware of this can be good foresight to have when selecting a contractor.

Doing some quick math on the expense of housing traveling crews (whether in an extended stay hotel or temporary apartments) in comparison to the amount of days they are able to improve the schedule by (and the revenue potential for that time) can often times be beneficial. You’ll find that the housing expense is a wash or less than that of the lost revenue.

Another money saving tip is to ensure that the construction provider is “hospitality” specific. Hospitality renovations are unique insofar as they are commonly performed while the property is fully operating. A specialist will know how to properly isolate and contain construction to minimize impact on operations and guests, reducing the potential for lost revenue.

The contractor also needs to have working experience on how to orchestrate a hospitality project which is very different from standard construction due to the nature of a phased or rolling schedule. An experienced hospitality-specific contractor is more likely to be able to conform to the demands of a critical-path (phased) or rolling (continual transition) schedule. Due to the nature of the fast-track pace of this schedule type, sub-trades have to work simultaneously with one another and not on top of each other. There is a learning curve of how to coordinate sub-trades along with scheduling of logistics and procurement at precisely the right time to all come together harmoniously. A hospitality-specific GC will know how to coordinate everything to create a well-oiled machine and ensure construction is not delayed, additional revenue is not lost, and units can be sold sooner.

Efficiency in a hospitality project is what will allow you to retain more of your existing revenue stream as well as determine how quickly you can begin to recover your investment and drive new sales. A hospitality renovation project should be executed in an extremely fast-paced manner. The time required to take a unit (or area being constructed) out of circulation and put it back into operation equates to a loss of revenue, so it is crucial that the contractor knows how to perform work quickly. The longer the construction cycle requires the more money is lost. An experienced hospitality-specific contractor is more likely to be able to conform to the demands of the schedule and the faster units are updated, the quicker you will be able to start recouping your investment.

Another money saving tip is whenever possible, use a turn-key service provider. Take advantage of the cost savings from economies of scale by entrusting multiple facets of the renovation to a company that is equipped to handle more than just the construction. Similar to “buying in bulk”, economies of scale refers to the decrease of unit price as production is increased. Often companies are able to procure FF&E (furniture, fixtures, and equipment) and finish materials, some offer inspection services or ADA (American’s with Disabilities Act) compliance surveys, while others might have an in-house millwork shop. Your bottom line can benefit significantly from taking advantage of packaging the various components of construction together.

Lastly, become equipped with knowledge about the bid process and construction planning to achieve the highest potential for an effectively run project. Effective execution, much like efficiency, translates into savings as well as increased potential for seeing a return on investment sooner.

Begin with effectively executing the bid process by comparing apples to apples when soliciting contractors. Be sure to perform a comprehensive, side-by-side comparison of estimates from bidders to ensure they are inclusive of all the same scope details. Does the low-bid include all elements of the higher-priced bids or will exclusions cost you in change orders later?

Another variable that may contribute to effectively executing the project is to avoid skimping on quality of goods and materials in order to save money. Most branded hotels have specified products and there is little variation between what contractors propose. However, if brand mandated standards are not in place or are not applicable, do some quick math on the life-cycles of goods and their replacement value. For instance; does the low-bid quote a lesser quality carpet, that will wear quickly and need replacement in two or three years, than that of the higher bid? Perhaps it would make sense to pay a little more for a higher quality, more durable carpet now and have it last an additional five to seven years.

Finally, when it comes to effectively executing a construction project, do your homework about the contractor and how they operate. Ask questions about company protocols for conduct of onsite workers and regulation of interaction with guests, smoking, noise, music, trash disposal, and daily clean-up. Make sure the contractor has very specific policies in place to manage these things or the disruption to operations can be costly.

The old adage you get what you pay for is very true of hospitality construction projects. Rather than trying to conserve money by selecting the cheapest contractor or the most inexpensive goods, save money by doing it well. Understanding how time, quality, and budget can be improved by the use of a qualified, hospitality-specific provider who can execute the project efficiently and effectively will result in selling rooms sooner, may increase market-share potential, and can help to recoup your investment faster.

As Project Director and Senior VP of Business Development, Julia Watson combines her knowledge of construction and her experience in business and relationship development, project management and coordination, estimating, and company-wide systems implementation to hospitality experts, FARROW Commercial, Inc. FARROW is a nationwide commercial construction company specializing in quality based, price sensitive, and production driven services to satisfy the demands of discerning core clients ranging from Resorts/Timeshares/Hotels/Motels to major and/or minor Commercial Tenant Improvements. Ms. Watson can be contacted at 916-474-5375 or julia@farrowcommercial.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.