Developers Should Know About Building with Operations in Mind

By Fred B. Roedel, III Partner & Managing Member, Roedel Companies, LLC | November 30, 1999

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.

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