Mr. Roedel, III

Development & Construction

Developers Should Know About Building with Operations in Mind

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

When developing a hotel, operations must be given priority standing. Operations are essential in order to get a hotel up, running, and producing revenue within a set timeline. Developers must spend the time required to integrate all aspects related to operating the hotel into the overall development plan at its inception. Failure to do so will inevitably result in costly delays. If you do not have an operations expert on staff, hire a consultant. Experienced operators are invaluable when it comes to establishing and meeting performance standards for the design, time, cost and quality of a hotel development.

How Operations Influence Hotel Design

Operators are in the best position to ensure that the final design of the hotel matches the operating organization necessary to maximize revenues, control expenses and deliver dependable free cash flow. In addition to providing important feedback regarding the coordination of the front desk and all of the back of house areas that support operations, they fully understand the importance of properly locating the various elements of a hotel in relation to one another in order to improve efficiency and reduce operating costs.

Too often hotels end up with far too much expense per square footage, which results in little or no return on investment. Finding the appropriate mix to maximize your opportunity takes an experienced operator. Typically he will label every square foot of space in a hotel as either revenue or expense in order to come up with the right revenue generating mix.

Operations Impact on the Development Timeline

The development timeline of any project is the time its takes to go from the first shovel in the ground to the point where revenue begins. A project's Return on Investment is affected by the length of this period. Unlike other asset classes, hotels have to be fully completed and operational from the first day of operations. A key performance standard that our firm constantly reviews is the total number of days that elapse between the issuance of a certificate of occupancy and the actual opening date. To reliably control this period time, it is crucial that a project's development schedule incorporate all of the operations tasks from start to finish. Anyone who thinks that an operator can work their money making magic on a property that is handed over to them only once it is built, without their prior involvement, is severely mistaken.

My company tells customers that hotels must be built up and finished down. This means that the finish elements of a hotel happen from the top floor down to the first. This synchronization allows floors to be completed and the operations staff to move onto a completed floor without interfering with the construction crews. Accomplishing this requires a great deal of coordination and communication from the first day. If projects do not maintain this coordination, it is inevitable that rooms and public areas will not be completed in a timely manner, construction crews will constantly occupy all areas of the building, the operating staff will not be able to efficiently prepare the property and the opening date of the hotel will suffer.

The following process to coordinate construction and operation functions has worked well for my firm time and time again so I strongly advise you to follow it. First, have the operator develop his own distinct timeline incorporating all the tasks involved in the pre-opening process. Second, integrate the pre-opening schedule into the overall development schedule. Third, as a team, review and coordinate the functions of construction and pre-opening on a regular basis. The objective is to have the hotel fully prepared to open and operate as the construction and the government and brand approval process is completed.

Operators and their staffs have a litany of tasks to undertake as sections of the hotel are completed and accepted. They focus around the following areas:

• Receiving and distributing inventory & operating supplies
• Cleaning & Setup
• Employee hiring, training and certification
• Coordinating and receiving a brands final approval and sign-off for opening

Completion of the above tasks is daunting and the fact of the matter is that it cannot be done overnight. Management companies experienced in opening new hotels will require no less than 120 days from the date they name a GM with no less than sixty of those days working inside the hotel property.

Development Budget

The final area in which an experienced operator can be invaluable to a hotel project is in controlling costs. The Operations related costs of opening a hotel include, but are not limited to, purchasing all of the necessary supplies, training employees and acquiring the necessary permits and licenses. If a project has experienced a change in its actual development costs there will be pressure on the operational side. Experienced operators will fine-tune the pre-opening budget to significantly reduce any potential wasted dollars.

Experienced operators know the supplies to purchase and the proper amounts needed. They will develop the hotels organizational structure and the required hiring and training plan. Involving the operator from early on in the project will provide many opportunities for said operator to develop and fine-tune their budgets and provide the owner a solid return on the investment.

Never forget that your guests' experience is the real verdict that will make or break your hotel's reputation. A tremendous amount of effort is required to prepare a hotel and its staff to ensure that guests have a wonderful stay. Involving an operator as early as possible and developing your hotel with his constant involvement will reliably improve your return on investment.

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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