As a team of project management professionals, we are often brought on board to assist investors as they look to plan and manage renovations of their select service hotels due to a brand-mandated property improvement plans. The success or failure of a capital project can be traced directly back to these early moments in a project timeline.
Here are three strategies that we believe every investor needs to consider when trying to successfully manage budgets, maintain schedules and minimize disruptions to operations.
Negotiate with facts
Design and construction costs are greater than ever before, making it harder for investors to move renovation projects forward. We find that creating detailed budgets that track to the line-item PIP scope of work creates better outcomes for owners during the PIP negotiation process. Having this data gives owners a basis to share with brand partners those areas of the renovation where cost and scope are not creating long-term value for the asset.
The key is for owners to start early enough in the process to allow time to create the detailed documentation, perform necessary reviews and any necessary financial analysis. Owners that lead PIP negotiations with facts and allow time for thoughtful discussion see the results in renovations that are more aligned with their investment criteria and budget.
Use allowances
Unexpected increases in costs during construction rarely come from scope that is black and white, but instead from the gray areas where it is difficult or impossible to fully understand before construction begins. While no one can predict the future, it is possible to utilize allowances in construction contracts to help better deal with the “what-if” moments.
Allowances permit owners to pre-negotiate for scopes of work early in a project so when that potential work is needed, the repairs can be completed quickly and at a fair price. How do you determine what work might be needed later in the project? Talk to the on-property operations team. What challenges are they dealing with every day? Does removing the guestroom wall vinyl always damage the drywall? Add that drywall repair allowance to your construction contract where you are still able to negotiate competitively and equally importantly.
Doing this allows the contractor to plan for that potential risk while minimizing impact to the schedule and keeping the renovation on track and within budget.
Execute programmatically
We have found that one of the greatest ways to succeed in PIP renovations is by planning and executing multiple projects on the same timeline. For owners with multiple assets, consider scheduling work to overlap where possible. This allows for a better cost-per-project and higher level of service from each project team members.
Being able to leverage economies of scale drives down costs at almost every budget line item. In our experience, cost savings can start with as little as three projects, and a programmatic strategy, in general, can see up to an overall 10% budget savings.
There is no such thing as an easy renovation, but with an experienced project team and the right strategy, Owners can have more predictable outcomes and see benefits to the bottom line.
Brent Hardy is president of The Hardy Group, a premier hospitality firm specializing in complex development and project management of full and select-service properties.
This column is part of ISHC Global Insights, a partnership between CoStar News and the International Society of Hospitality Consultants.
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