Renovate Smart: A Tactical Approach to Savings

By Julia Watson Project Director / Sr. VP of Business Development, FARROW Commercial, Inc. | January 01, 2012

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.

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