By Shafeek Wahab
The bulldozers are working and a construction crane is being erected on that vacant lot you pass each day going to and from home. The sign on the fence states that a new 150 room 3-star hotel is being built with a planned opening date of mid -2014. If you have ever wondered just how that hotel was created, you may have wondered about some or all of the following questions:
Who will manage the hotel once it opens?
How long does the process take from idea to grand opening day?
What type of guest (consumer) will be attracted to this hotel?
Why are there 150 rooms and not 250?
How did someone select that particular vacant lot?
What is meant by 3-star?
Who selects the architect and the interior designer and the role each play?
Who manages the myriad details that go into the development of a new hotel?
Who can help maximise the returns?
How long does the process take from idea to grand opening day?
Development makes the hotel project a reality. From the feasibility study until opening day, the development process affects not only the physical aspects of construction but the fiscal progress as well. Failure to stay on schedule or on budget jeopardizes both the property’s image and its bottom-line.
At this stage of the planning process, the project has begun to take shape and the feasibility has been confirmed. Finalizing the concept will generally involve three activities:
Identify overall project costs.
Conduct formal market studies and refine your marketing plan.
Analyze investment and financing needs
Some elements of these activities were initiated earlier in the development process. It is now time to complete any additional research that may be needed and to finalize the action plan and strategy for implementation. It may now be necessary to conduct additional market studies or revisit the previous market research done for the proposed project. The project may have undergone changes from the original concept and additional analysis is required.
Potential financing sources for the project may require independent market studies as a condition of lending. By this time, you should have a much better handle on likely project costs and you now need to formalize these estimates. All project costs should be clearly identified and supported by third party estimates or vendor quotes. Many financing sources may require independent cost verification as a condition of lending.
Once overall project costs are confirmed, it is time to finalize investment and financing needs of the project and secure commitments for this funding. The mix of equity and debt determined from earlier analysis and pro forma development should be updated to reflect the final projected costs.
Developing designs, construction plans, bid specifications, and selecting contractor
At this stage, you probably only have conceptual or schematic drawings of your project. It is time to add the details to these concepts. Working with your development team, use your conceptual designs to determine how the space can best be used. For instance, if you want to create a waterfront restaurant, arrange seating areas to take advantage of waterfront views.
The relationship of functional space is also important; for example, the floor space for the restaurant versus the lobby. From the conceptual design you will get a good idea of whether the intended use will work and the obstacles you will need to overcome. To move to the preliminary design stage, you will need to consult with the planners, engineers, and architects on your team. You don’t want working drawings at this point, but you will need a detailed description of the proposed work and a good cost estimate to feed into your financial analysis.
A building floor plan and exterior perspective view of the completed project and its environs is also recommended. As you move deeper into the final design phase, you will draw more and more on the design and engineering professionals on your team. Building on the earlier building and site assessments used to identify the physical constraints and opportunities for the use of the building; you will prepare detailed physical design studies that will be incorporated by the architect into the preliminary and final plans and specifications.
Following completion of the design studies and final program analysis, your architect should prepare construction documents. Final construction documents consist of plans and specifications necessary for the bidding and construction of the project. They are more detailed versions of the schematic plans and design development documents and will function as instructions for the construction of the project. These all come together in the bid package used to solicit contractor’s bids. These should provide clear directives for the general contractor and subcontractor on all aspects of your project. The bid specifications should also provide clear guidance on how bidders should submit and present their bids, and should include any special terms, such as penalty clauses or late charges.
After you have approved the construction documents and obtained the required permits, the project is ready for the bidding phase. Of course, if you are a developer-builder, have already selected a developer, or you already have a contractor on your team, you may not need to go out for bids. You may be looking for a general contractor to perform, or work with a series of subcontractors to perform, all of the contracting tasks related to the redevelopment project including interior, exterior, systems and site work. In this case, the finished plans and specifications are bid out to qualified general contractors.
Perhaps the most important element in your review of bids is to make sure you are able to select an experienced contractor for the job. Contractors who have undertaken hotel builds previously, as opposed to those who have not, are better suited to understand the owner’s expectations. Alternatively, you may be looking for a construction management firm. This approach differs from hiring a general contractor.
The individual or firm will essentially run the job for a set fee. They will help bid the individual components of the job. They will provide services, including cost estimation, contract administration, and scheduling. Once again, you may already have a construction management firm on board or you may be using your architect in this capacity. Before you begin constructing your project, it is essential that all environmental reviews and approvals are in place.
Building your project
Depending on the location, size and scope of work involved, and, in this case - a 150 room hotel build, the preparation, and approval of the construction documents, obtaining the required permits, selecting the qualified general contractors or construction management firm can take between four to six months dependent on how soon one is able to clear any hurdles or barriers encountered – be it the bureaucracy or of one’s own making. Construction commences once you have awarded the contract and a pre-construction meeting has been held. The architect on your team provides basic construction phase services as defined by the local architectural standards. Serious thinking and rethinking of the project should be done before work begins. Changes later can push project costs to unacceptably high levels. Owners can be their own worst enemies if they keep making changes during the project. Not only does it de-rail the set timeframes but also they may find they have to scale down at some point in the project because they cannot afford to complete the original plan. Snags are an inevitable part of the development process.
The aim is to address problems at the earliest outset/opportunity. Scheduling major project milestones makes sure that everyone will stay on track, on time and on budget. Done professionally and properly the construction of the hotel should proceed in a timely manner as projected. In Sri Lanka, building a 150 room hotel would take around eighteen to twenty two months until completion – not unless (on a less serious note), you build it in China.
While many of us are figuring out how pizza is made and delivered to our hotel rooms before our room service waiters can deliver ice, the Chinese are breaking new barriers in the construction industry. Only recently, they claim to have built a 15 story hotel in only 6 days! Yes, it is not a hoax. Historians will recall that it took the Chinese 15 years to construct the Forbidden City in the early, pre-computer 1400’s. The Forbidden City included 980 buildings and there were one million workers. If one were to rapidly calculate, it was probably at the same pace as that of the recently built 15 story hotel – meaning that about 65 buildings were completed on average each year or one building within one week!
So, what makes it work so efficiently? The Chinese construction worker is hardly educated and receives no social benefits either. It is just clear, concise instructions and an unrelenting mandate; Deliver or else! No moaning, no groaning, no slacking or excuses – just straight hard work in sunshine, rain or snow.
The pre-opening phase
Every new hotel must plan and prepare for opening. This is done long before the builders complete their work and hand over the hotel to the owners. Termed the pre-opening phase, it is vital period where the hotel fulfills the objective of preparing and positioning the future hotel in the market, recruit and train staff and set the Standards of Operation (SOPs) and minimum Quality Standards (MQSs), under which the hotel will operate.
The first thing one needs to do is to set up the pre-opening office. In most instances this temporary office is on-site, where a section or part of the building that is completed is utilised for this purpose. Depending on the type and size of the hotel and in accordance with the planned date for the hotel opening, a pre-opening phase can cover a 6 to 9 months period for small and medium sized hotels, with larger hotels requiring as much as 12 to 15 months or more. During the pre-opening phase, some of the important immediate and intermediate activities the pre-opening office will focus on include:
The organization of external and in-house training
Recruitment of Heads of departments (especially Head of HR & Finance) and the key/core staff
Recruitment of the General Manager
Establishing basic personnel standards
Providing specialized training for personnel
Managing the budget according to established standards and strategic plans of the operator
Preparing the Budget for the Pre-opening phase
Fine tuning the Budget for the first year of hotel’s operations
Marketing and sales:
Conducting pre-opening sales and marketing activities
Implementing the distribution and sales channels
Establishing a corporate identity and marketing campaign
Connecting the hotel on the Global Distribution System (GDS)
Preparation and implementation of the opening ceremony for the Grand Opening
Readiness for inspection, certification and hotel categorization:
Preparation of the hotel for the official categorization by the relevant authority
Preparation of the hotel for all types of inspections
Preparation of the hotel for inspection by the international hotel group (for hotels belonging to the hotel chain)
(To be continued).
(The writer has extensive background in Hospitality Management spanning over 30 years. He has held key managerial responsibilities in internationally renowned hotel chains, both locally and abroad, including his last held position as Head of Branding for a leading Hotel Group in Sri Lanka. He can be contacted on [email protected])