Hotel Build Cost Guide

7/21/2019 Hotel Build Cost Guide

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Maximising Value

Leisure + Culture

Hotel Build Cost Guide


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Contents

01 Introduction 04

02 Design 08 Design Guidelines 12

Area Schedule 26

03 Cost 32

Cost Drivers 36

Cost Planning 46

Cost Models 52

04 Procurement 66

05 Summary 76

06 Contact Details BackCover


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Introduction

At AECOM we offer a range

of services that meet the

development and asset

management needs of

hotel owners, operators and

developers from initial feasibility

through to planning, design,construction and operation.

Before there is a design, there isan idea for a hotel. Assessing thefeasibility of a hotel developmentrequires you to understand whatthe market opportunity, needs

of the market and cost of thedevelopment are.

This guide explainsthe relationshipbetween thedesign and the

costs of hoteldevelopment anddemonstratesthe benefits ofobtaining cost

advice throughouteach stage ofthe developmentlifecycle.

4: INTRODUCTION


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Based on outline informationabout the type and size of hotelproduct and the amenities that

the market requires, the costconsultant is able to provide aninitial cost estimate to informthe development appraisal.

During the design phase,understanding the way in which

the design of a hotel can influencethe cost can help ensure that thecorrect choices are made at theearliest stages of a project andwill avoid expensive re-design andcost in use.

By providing an analysis of cost

by area and function, the costconsultants advice will ensurethat costs are being allocatedto those parts of the hotel thatwill deliver the best return oninvestment over the lifecycleof the asset.

Once the design is completethe next step is to procure acontractor to undertake the

construction of the hotel. Thisrequires an understanding ofthe various procurement optionsavailable to achieve the rightbalance between price and risk.

This guide does not provide all

of the answers but it will providethe reader with an understandingof the important relationshipbetween the design and thecost of a hotel and the benefitsof obtaining cost advice at eachstage of the development process.

INTRODUCTION :7


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DESIGN


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Understanding the way inwhich the design of

a hotel influencesthe cost means that

the correct choices are

made at the earliest

stages of a project

and avoids expensivere-design and cost in use.


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Design guidelines

Food and beverage outlets

Food and beverage outlets andrestaurant requirements vary bylocation and hotel type. However,

a good rule of thumb is to providerestaurant seats ranging from0.75 to 1.2 times the number ofguestrooms. This does not takeinto account specific requirementsfor conferences, functions orbanqueting, for which additional

provision will need to be made in,or adjacent to, the function suites.

Most luxury hotels will have atleast two restaurants but somehotels operating at the upper levels

of the market can offer up to four orfive different types of restaurants.Generally, there will be a main all-day dining area that serves as themain breakfast area in the morningand can be converted into lunchand dinner venues with different

settings. The restaurant diningarea is calculated on the basis ofan area-per-seat allowance. Thisallowance varies between about1.5 to 2.5m per seat, dependingon the style and mode of operationof the venue. Further allowancesshould be made for the service

stations and circulation spacewithin restaurants.

12: DESIGN


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Lounges and bars

A hotel is also likely to have anumber of lounges and bars. Theseating capacity allowance for

these ranges from 0.5 to 0.9 timesthe number of hotel guestrooms.The area calculation is made on anarea-per-seat basis.

Kitchens, storage and supportareas are excluded from thesearea calculations. Kitchens are

calculated as food preparationareas and form part of the backof house and support areas.

Meeting and function rooms

Ballroom / banquet hallWhile many major hotel chainshave their own design and area

guidelines for the capacitiesof a ballroom / banquet hall, aminimum size would be in theregion of 750m. The generalallowance for calculation of thenet area of the ballroom / banquethall is in the region of 1.20m per

seat. The minimum total number ofseats is the equivalent of 1.5 to 2.0times the number of guestrooms.

DESIGN :15


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Junior ballroomand function rooms

In addition to a main ballroom /banquet hall, the hotel may havea junior ballroom and smaller

function rooms. A junior ballroomtypically has a seating capacityof 400 to 500 people.

Function rooms that double up asmeeting rooms should be a seriesof rooms catering for groups of20 to 50 people. There should be at

least three of this type of functionroom. In addition, there may bea provision for a boardroom witha size of around 50m. The totalcapacity of the function / meetingrooms should be in the proportionof approximately 0.5 times the

number of hotel rooms.Essential for all function suitesis the concept of flexible meetingspaces, allowing for changesin shape, and size by meansof acoustic, sliding / foldingpartitions. Each potential

function area must be able to beserviced separately.

Pre-function areas /break-out space

These should be approximately33% of the area of the ballroom,banquet hall, junior ballroom,

function and meeting rooms.

Support areas

All of the above areas excludesupporting areas such as furniturestores, restrooms, general storage,

AV control rooms, interpretersrooms and so on. As a rule ofthumb, these would be allowed ona square metre per seat basis.

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General public areas

The general public area of a hotelmay include:

(a) Business centre, including A reception / waiting area

A secretarial area

A small conference /meeting room

Small booths / ofces

(b) Health club / fitness centreSpace should be allocated for:

An entry area

Common facilities such as

reception, examining room andnurses room

A beauty centre

A mens and womens spa

A tness centre and gymnasium

A spa restaurant / juice bar

Employee facilities such as

lockers, lounge and restroom

(c) Commercial spaceThese spaces are often let out.Often there are around four to five

such outlets in the hotel.

(d) Front lobby and front officeThis covers the main entrancelobby, which should be a generousspace. The area allowance iscalculated on the basis of a squaremetre per hotel room. Supporting

the main entrance lobby is thelobby waiting area. An allowanceis made for 20 people on the basisof 2.3m per person. These areasgenerally have higher or double-volume ceilings and pricing shouldtake this into account.

DESIGN :17


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Provisions should be made formale and female restrooms, withthe female restroom slightly

larger to allow extra space for avanity area. A janitors room isalso required to store cleaningequipment. A further allocationis made for a reception desk areatogether with a front office. As aguide, 1.75m length is assumed for

each workstation at the receptiondesk. One workstation is requiredfor every 75 rooms. A width of1.5m is allowed for working spacebehind the counter and a width of4m is allowed for guest queues infront of the counter.

Back of house, supportand services areas

These are the non-public areas ofthe hotel. There should be minimalinterior designers input for these

areas, except for some of theoffices. The spaces occupied underthis category include:

(a) Administration andservice areasThe administration andservice areas include various

departmental offices, such as:

Front ofce support containing

the office of the front officemanager and credit manager,telephone operators room,cashiers room and counting room.

Safe-deposit box, stationerystorage, general office and pantry.

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Executive ofces containing

the offices of the generalmanager, resident manager,

food and beverage manager,assistant food and beveragemanager, general office areas,executive boardroomand storage.

Sales ofces containing the

office of the sales director,

sales manager, market analyst,sales executives, group salesco-ordinator, public relationsmanager, reservations manager,general office, conference roomand storage.

Catering / banquet ofces

containing the offices of thecatering manager, banquet

representatives, conventionservices and secretarial area.

Accounting ofces containing

the offices of the financialcontroller, assistant financialcontroller, accounting workarea, payroll manager, general

office and storage and mensand womens restrooms.

DESIGN :21


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(b) Food preparation, supportand service areas

Food preparation and service areasinclude support spaces for variousdepartments, such as:

Food preparation, main and

support kitchens containingproduction kitchens supportingthe banquet hall and function

rooms, kitchens for the variousrestaurants, bakery / pastryshop and offices for theexecutive chef and roomservice manager. Areacalculations are generallymade on the basis of area perseat. Alternatively, as a general

guide, an area equivalent to 40%of restaurant net areas wouldmake up the kitchen areas.

Storage areas containing

storage for dry food, refrigeratedfood (cold rooms), beverages,

refrigerated beverages,ballroom liquor, the service bar,silverware, chinaware,glassware, utensils andstewards and janitors rooms.Area calculations are generallymade on the basis of an

area per seat for food storagesupporting the kitchens, andarea per key for general storage.Generally, storage areas will bein the region of 30 to 50% of nettotal food preparation areas.

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Service entrance areas

containing areas for the loadingdock and truck parking bays,

receiving areas, receiving office,office for the purchasingmanager, purchasingdepartment, security /timekeeper, flower shopstorage, trash holding area, wetgarbage refrigeration area, can

wash, garbage compactor,empty bottle storage,refrigerated storage forfood, employee entrance area,compressor rooms and the like.

Housekeeping areas

containing offices of theexecutive and assistant

housekeeper, housekeepingclerks, seamstress, fittingrooms and storage for linen,supplies, lost and found, uniformand uniform-issue rooms.

Laundry areas containing the

laundry and valet office, laundry

room, soiled linen sortingarea, guest laundry area, valetservice room, supplies storageand compressor room.

DESIGN :23


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Area calculations for

housekeeping and laundryareas are generally made on

the basis of area per key ofthe hotel. Requirements forlaundry facilities will varybetween locations and betweenoperators. In many instances,the laundering of bedsheetsand towels is outsourced. If so,

the requirements for in-houselaundries are limited to a smallnumber of domestic machines.

Engineering areas containing

offices of the engineeringdirector, assistant engineer,general maintenance and

secretary, paint shop, carpentryshop, upholstery shop, plumbing /refrigeration shop, electricalshop, key shop, TV repair shop,parts storage, energymanagement computer roomand janitors store.

Mechanical areas usually cover

two major locations, one ofwhich is normally in the

basement, the other on theupper level or roof space ofthe hotel.

Mechanical areas in the

basement contain theengineers control room,engineers office, toilet and

locker, janitor room, boilerrooms, fire control pump rooms,electrical sub-stations,electrical rooms and wet risertanks.

Mechanical areas in the

upper levels can contain the

air handling units, domesticwater tanks, sprinkler tanks,wet riser tanks, condenserwater storage tanks, electrical,switch and power rooms,although these may also behoused at the basement level if

space allows.

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(c) Employee facilities

Employee facilities areas include

spaces for: Human resources ofce

containing rooms for thepersonnel manager, assistantpersonnel manager,interviewing, training manager,training, first aid application

and storage. Employee areas containing

staff lockers and shower areas,toilets, dining and recreationareas. If not provided in thefeasibility study or the businessplan, the number of employees

can be calculated on thebasis of employees per key. Forfive-star hotels, the range canbe from 1 to 1.5 employees perkey. The changing and lockerareas are generally based onarea per employee.

DESIGN :25


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Using functional area datafrom previous projects and fromoperators standard requirements,

it is possible to create a reasonablyaccurate assessment of the spacerequirements for a hotel.

This can form the basis ofpreliminary budget calculationsfor a hotel of a particular standardwith a stated number of rooms and

ancillary functions (restaurants,fitness, spa, banqueting and so on)in advance of the development ofany design.

The hotel area schedule must,therefore, be based on realisticnumbers. Any gross over or under

allowance of areas would cause adistortion of the forecast cost.

The area allowances must ofcourse be tested against otherhotels of similar standard in the

geographical region, to checkthat it is competitive. Ideally, themarket feasibility study provides asuggested high level area programbased on market requirements.

A preliminary budget costingfor a hotel development can

be generated quite quickly andefficiently, based on data forsimilar existing hotels, designcriteria of major hotels andknowledge of the market. Thisincludes setting the number ofhotel room bays and keys and

the total seating capacitiesfor food and beverage outlets,entertainment lounges, banquet,ballroom and meeting facilities. Itshould also cover the capacity ofthe health club facilities and thesize and number of retail outlets.

Area schedule

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Worked example based on a luxury hotel

Bays Keys Total bays

A. Standard guest rooms1. King rooms 1 200 200

2. Queen rooms 1 100 100

3. Accessible rooms 1 20 20(circa 5% of total room count)

4. Other standard rooms 1 55 55(eg twin)

B. Suites1. Junior suites 2 40 80

2. Executive suites 3 10 30

4. Presidential suites 5 2 10

5. Club lounge 5 - 5

Total 427 500

Based on the above configuration, the total number of bedroom bays is500 and the total number of keys is 427 about 85% of the total numberof bays.


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Typical total area allowancesfor luxury hotels vary aroundthe world, from circa 80m to

over 120m of gross floor area(excluding parking and externalareas) per bay. Hotels in moreWestern locations tend to havesmaller bedrooms than thosein the Middle East or Asia. A500-bay five-star hotel could

therefore be expected to havea range of gross floor area ofbetween 40,000 to 60,000m.

DESIGN :29


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The breakdown between thebedroom zone, public areas andback of house for a notional 500-

bay, 50,000m hotel would be:

A. Guestrooms and suites 22,500 to 30,000m 55 - 60%

B. Public area 10,000 to 15,000m 20 - 30%

C. Back-of-house 7,500 to 12,500m 15 - 25%administrative, supportand services areas

Hotel total gross area40,000 - 57,000m 100%

Based on the above hotel floorareas, the gross area per bayranges between 80 to 115m.

The net areas of the bedrooms(including bathrooms) variesaccording to geographical location,from a low of about 35m up toabout 55m but typically between40 and 50m net bedroom area is

a good guide


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COST


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By providing an analysisof cost by area and

function, the costconsultant is able to

ensure that costs are

allocated to those parts

of the hotel that deliver

the best return oninvestment over the

lifecycle of the asset.


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The major cost drivers of a hoteldevelopment include:

a. Site location, shape, conditions,means of access and visibility

b. Position of the hotel inthe development

c. The shape and form of thebuilding

d. The external facades,particularly the extent ofglazing and cladding

e. The level of sophisticationof building services and fire-protection systems

f. Particular requirements of the

chosen hotel operator

g. Shape and layout of theguestrooms zone, particularly ifthis is a tower

h. The level of provision andfacilities of rooms

i. The storey height ifexceptionally high, it willneed a heavier structure,more complex foundations,additional lifts and fire-fighting installations

j. Location of function rooms.

One major impact on the costof the structure is the locationof the main function room orballroom. The ballroom shouldnot be located directly belowthe hotel guestrooms tower,as it requires column-freespace that is difficult and

expensive to accommodate andis likely to require theintroduction of transferstructures at the base of theguestroom tower

Cost drivers

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The choice of guest

room configurationcan affect area

efficiency by as

much as 20%

of the grossfloor area.

Another area for carefulconsideration is the location ofthe bank of guest and service

lifts rising up to the guestrooms.These should be located centrallyto the guestroom block and theguest lifts should descend into theentrance lobby, where pedestriantraffic can be monitored by thefront desk.

A third major consideration is theconfiguration of the guestroomblock, particularly if this is inthe form of a tower. Analysisshows that some shapes andconfigurations of a guestroomtower yield more cost-effective

solutions than others. In fact, thechoice of configuration can affectthe area efficiency by as much as20% of the gross floor area.

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Ideally, the efficiency of theguestroom zone should be inthe region of 75%for a tightly

designed, double-loadedcorridor layout. However, for asingle- loaded corridor or atriumlayout, the efficiency can dropas low as 60%. Obviously, thehigher the efficiency, the moreeconomical the construction cost.

It is critical to ensure the designis economical without sacrificingthe design intent. Due to themultiplier effect of having manyfloors in the guestroom zone,minor differences or inefficienciescan have a major impact on theconstruction cost.

The following factors must beconsidered:

a. Number of guestroomsper floor

b. Lift location and escape

staircase cores

c. Shape of guestroom tower, as itaffects the wall-to-floor ratios

d. Corridor configuration

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A limiting factor of the number ofguestrooms per floor is the localauthority building code requirement

for fire evacuation, which iscontrolled by the distance betweenfire-escape stairs. In a tower, anoptimum number of guestroomswould be in the region of 16 to 24rooms per floor if only two fire-escape stairs are envisaged.

This ratio also facilitates efficienthousekeeping. Increases in thenumber of rooms per floor cantrigger the need for additionalfire-escape stairs and additionallifts. This in turn may require thelift core to be increased in size,

with its corresponding increasein gross floor and elevationareas leading to an increase inconstruction costs.

A guestroom tower may takevarious plan shapes, ranging fromrectangular to circular, triangular,

curved or offset. It has beenproven that the most efficientshape is generally rectangular,with a double loaded corridorconfiguration.

Curved and circular shapedtowers will involve higher costs

because of non-standard roombays and panelled or facetedglazing. Architects may opt for anapproach to maximise views fromthe guestrooms to accommodatethe often narrow site, but there isa cost premium to this and this

choice should be scrutinised.

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The single-loaded corridor configuration is

less efficient as the corridor serves only oneset of guestrooms. Efficiency is in the region of

65% or less.

The double-loaded corridor configuration

is efficient, with one single corridor serving

guestrooms on both sides. Efficiency is in the

region of 70 to 75%.

Typical guestroom layoutGuestroom sizes are generallystandardised. For a five-star hotelit would be rectangular in shape,

in the region of 40 to 50m netarea inclusive of sleeping area andbathroom. Some developers ordesigners may attempt to providelarger and odd-shaped roomswhich may not be economical.

Good workable dimensions are

approximately 4.5m by 9.1m. Thewidth should not be excessive,as it increases the length of thecorridors, the cost of the structureand affects the external walls ofthe bedroom zone.

Examples of differentconfigurations are shown below.

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The offset configuration is the most efficient

configuration in terms of accommodatingmore rooms per floor, with minimum effect on

external walls and finishes. Efficiency is in the

region of 75%

The rectangular configuration is not efficient,as it requires additional corridor lengths to

serve end rooms. Efficiency is in the region of

65% or less.

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The triangular configuration providesinefficient space for the central core. The

corner rooms are odd-shaped. Efficiency is

likely to be below 65%. The atrium configuration is served by single-

loaded corridors, which reduce efficiency.

Though it may provide an opportunity for

glass elevators, there is a cost premium.

Smoke extraction and an extra premium for

roof construction is a major consideration.

Efficiency is likely to be around 60%.

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The circular configuration may have shorter

corridors but it is a challenge to design

efficient room space, especially in relation to

the location of the bathroom. The central core,

where the lifts, housekeeping and fire-escape

stairs are located, will determine the floor area.

It is unlikely to achieve efficiency beyond 70%

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Cost planning

Cost planning is typically done intwo stages. The first stage involvesan initial order of magnitude

costing or cost appraisal. Thisusually takes place before anydesigns have been produced,and is based on available costdata and past experience of hotelprojects of comparable standard,together with an understanding of

the current market trends.The second stage involvesmore detailed cost planningbased on design informationprocured specifically for theparticular project.

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Initial order ofmagnitude costing

Using benchmarked areadata, a preliminary scheduleof all functional areas in

the hotel is made based onoutline information about thehotels market position, therecommended type of hotelproduct, and the amenities themarket requires. This produces areasonably accurate estimate of

overall gross constructed area.Based on this preliminaryarea schedule, the estimatedconstruction cost for the hotelis calculated. This is usuallydone both on a cost per squaremetre basis and on the basis

of a cost per bedroom or key,using historical benchmark datacollated from similar projects.Assuming that both calculationsproduce answers in the sameballpark, it is likely the hoteldesign is reasonably efficient.

Our cost consultants are wary ofhotels with, for example, unusuallylarge or extensive restaurants,

conference facilities, health clubs,suites or other unusual facilitiesthat skew the comparativecalculation by increasing thecost per key without perhapssignificantly affecting the cost persquare metre.

For any such unusual hotels,further discussion with thedeveloper is advisable to ensurethat his requirements have beenaccurately captured. An initialcost prepared on a $/m should,however, be more reliable.

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With the preliminary costings inplace, a construction cost cash-flow forecast is prepared, based

on the estimated time required tocarry out the design, procure theright contractor and then build andfit-out the hotel. The results of thiscash-flow study give an indicationof the likely draw-down of thefunds throughout the construction

of the hotel to allow developersand investors to assess the needfor, and cost of, funding.

The construction cost consultantthen works with the developerand the design team to reviewand modify the scope and nature

of the hotel design, and thecorresponding construction cost.

This review process may berepeated a number of timesuntil the developer arrives at

a financially viable schemethat yields the required targetprofitability. In this way, a budgetis refined and set for constructionof the hotel and the developeris given the confidence in hisviability calculations to give the

go-ahead to proceed to the nextstage of the project.

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Detailed cost planning

The developers design teamshould design the hotel toprovide the functional areas

necessary to meet the hoteloperators requirements withinthe constraints of the approvedbudget. The construction costconsultant costs the design andprepares an initial cost plan thatbreaks down the cost of each

element of the building intosmaller, more identifiable andmanageable items.

The cost plan is fine-tuned to tryto make sure that firstly, overallcosts fall within the targetedbudget and secondly, that the

spread of the expenditure is aboutright ie the money is beingspent on those elements whichare customer facing or affect theoperating costs of the building and therefore improve thepotential viability of the scheme.

This may involve a value-engineering (VE) process, carriedout with the construction cost

consultant guiding the designersby using analyses and benchmarkcomparisons with other hotelprojects. All cost elements arescrutinised for efficiency in designand whether they add value tothe hotel. Our construction cost

consultants, who are well-versedwith the various cost drivers of ahotel development, share theirknowledge and experience withthe design team, challengingand being challenged, therebymaximising the value andeffectiveness of the hotel building.

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The construction cost consultantmay suggest alternativeconstruction methods and

advise on the range of productsand materials available in themarket that are within theallowable budget, from which thearchitects and interior designerscan then select.

Once the preliminary designs

are completed and have beenchecked to remain within budget,the construction cost consultantcompiles all the information intoa final detailed cost plan thatis distributed to the developerand consultants. This defines

the design intent and the agreedbudget to which the developer anddesign team should adhere.

The initial budgeting processminimizes time spent pursuingdesign options that are either not

affordable or do not produce therequired financial return.

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Constructioncost consultantsshare theirknowledge andexperience withthe design team,challenging andbeing challenged,thereby maximisingthe value andeffectiveness ofthe hotel building.

COST :51


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Spain

TOTAL USD USD/m2(GBA) USD/key % 8,544 m2 153 keys

6,072,299 711 39,688 19%

1,667,432 195 10,898 5%

11,027,489 1,291 72,075 35%

7,062,250 827 46,158 22%

5,819,339 681 38,035 18%

263,350 31 1,721 1% 31,912,160 3,735 208,576 100%

Structure and envelope

Internal fit-out

Building services

On-cost

FF&E

External worksTotal

Cost models*

Europe

* Cost models based on a mid-market product

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Russia


6,493,440 760 42,441 29%

358,848 42 2,345 2%

5,510,880 645 36,019 24%

3,740,300 438 24,446 17%

5,615,579 657 36,703 25%

854,400 100 5,584 4% 22,573,447 2,642 147,539 100%

COST :53


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United Kingdom


7,800,037 913 50,981 26%

3,785,507 443 24,742 12%

7,543,701 883 49,305 25%

5,197,200 608 33,969 17%

5,819,339 681 38,035 19%

263,350 31 1,721 1% 30,409,134 3,559 198,753 100%


Internal fit-out

Building services

On-cost

FF&E

External worksTotal


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Dubai


5,885,147 689 38,465 23%

3,022,309 354 19,754 12%

6,289,284 736 41,106 25%

4,250,100 497 27,778 17%

5,356,243 627 35,008 21%

351,767 41 2,299 1% 25,154,850 2,944 164,411 100%


Internal fit-out

Building services

On-cost

FF&E

External worksTotal

Cost models*

Middle East

* Cost models based on a UK mid-market product.

The equivalent product in the Middle East is a budget product

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Qatar


8,116,800 950 53,051 24%

3,844,800 450 25,129 11%

8,116,800 950 53,051 24%

3,844,800 450 25,129 11%

9,825,600 1,150 64,220 29%

427,200 50 2,792 1% 34,176,000 4,000 223,373 100%

COST :57


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Saudi Arabia


5,002,375 585 32,695 23%

2,568,963 301 16,791 12%

5,345,891 626 34,940 25%

3,612,585 423 23,612 17%

4,552,807 533 29,757 21%

299,002 35 1,954 1% 21,381,623 2,503 139,749 100%


Internal fit-out

Building services

On-cost

FF&E

External worksTotal

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South Africa


3,875,822 454 25,332 24%

1,380,676 162 9,024 9%

5,598,122 655 36,589 35%

2,808,660 329 18,357 18%

2,136,503 250 13,964 13%

146,327 17 956 1% 15,946,110 1,866 104,223 100%


Internal fit-out

Building services

On-cost

FF&E

External worksTotal

Cost models*

Africa

* Cost models based on a mid-market product

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Nigeria


6,965,981 815 45,529 24%

2,496,952 292 16,320 9%

10,076,620 1,179 65,860 35%

5,055,780 592 33,044 18%

3,845,742 450 25,136 13%

263,389 31 1,721 1% 28,704,464 3,360 187,611 100%

COST :61


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Nairobi


3,978,504 466 26,003 24%

1,243,969 146 8,131 8%

5,080,700 595 33,207 31%

2,821,440 330 18,441 17%

3,281,781 384 21,450 20%

160,960 19 1,052 1% 16,567,354 1,939 108,283 100%


Internal fit-out

Building services

On-cost

FF&E

External worksTotal

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UK

Spain

Russia

Dubai

Qatar

SaudiArabia

South

Africa

Nige

ria

Nairobi

250,000

200,000

150,000

100,000

50,000

0

Cost per key analysisBased on a mid-market hotel

FF&EExcluding FF&E


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UK

Spain

Russia

Dubai

Qatar

SaudiArabia

South

Africa

Nige

ria

Nairobi

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Cost/m2analysisBased on a mid-market hotel

FF&EExcluding FF&E


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PROCU


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EMENT


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Selecting a contractorto undertake the

construction of thehotel requires an

understanding of the

procurement options

available to ensure

that the right balancebetween price and risk

is achieved.


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Procurement

Having completed the cost

planning process, agreed a

budget and scope of work and

received the go-ahead fromthe developer to proceed to the

next stage, the construction

cost consultant advises on the

most appropriate procurement

approach for the particular blend

of time, cost and quality that

relates to the hotel project.Every project is different,and it is important that thechoice of the most appropriateprocurement route and theselection and pre-qualificationof potential contractors for the

project is carefully considered.Even the best cost plans will beundermined if the wrong choice ofcontract or contractor is made orif the design information on whichthe contract is let is incomplete orof poor quality.

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The three most commonlyencountered forms ofprocurement for hotels are briefly

described below:

Traditional lump sum

Traditional lump-sum contracts,based on full bills of quantities orpriced schedules of work, provide

an essential means of lettingand cost managing the work asit proceeds. However, they dorequire all design to be finalisedand detailed, and completedocumentation to be preparedbefore going to tender, whichtakes time and the overall life of a

project is therefore usually longerusing this route. Careful planningand interfacing of, for example,the interior design with the mainbuilding works can reduce theimpact on the master programme.

The main advantage of completingthe design before constructioncommences is the fact that the

contract cost is established inadvance of entering into thecontract and work starting on site.The cost risk to the developer istherefore relatively low. Control ofdesign and quality remains largelyin the hands of the developer and

the design team.If properly set up andadministered, this can be a goodform of contracting to produce ahigh-quality hotel.

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Design and build

The design and build (d+b) approachneeds a clearly stated set ofrequirements, setting out in detail

those parts of the finished hotelthat are important to the developeror hotel operator (for example,the finishes to the public areas orthe performance of the servicesinstallations, but not necessarily thedetail of how the main structure is

put together) but without producingfull design documentation.

The contract price is based onthe contractor satisfying theserequirements while leaving a

significant part of the design,particularly the detailed designdevelopment, to the contractor.The perceived lack of control bythe developer over quality issuesmay lead to compromises bythe builder despite the design

team often being novated tothe contractor. This is a goodand usually cost-efficient formof contracting for reasonablystandard, repetitive types ofhotel such as budget lodges andbranded mid-market hotels. It isless often used for luxury, five-

star hotels.

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Construction management

The construction management(CM) approach, where the workis let under a series of smaller

individual trade contracts underthe management of a specialistconstruction managementcompany, can provide programmeadvantages but may expose thedeveloper to greater cost risks.This is because the out-turn cost

(end cost) is not known until thelast trade package is agreed.

This construction managementapproach also does notprovide the developer with asingle point of responsibilityfor the construction works,

which developers might seeas a disadvantage. It requires amuch greater involvement bythe developer, in dealing withindividual trade contracts andpackage contractors.

This approach is often used onlarge or complex hotel projectswhere making a quick start on

site, before the whole designis completed, is important inorder to minimise the overallduration of construction. Carefulconsideration of all factors isneeded before proceeding downthis procurement route.

A modified version of thismethod can be used where,part way through the designand procurement process, thecontractor warrants the cost byproviding a guaranteed maximumprice (GMP), usually including

a premium cost to reflect theadditional risk he is taking on.Any savings achieved within theGMP are shared between thedeveloper and the contractorin a predetermined proportion,thereby creating an equitable risk-sharing arrangement.

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Procurement management

The cost consultant will be activelyinvolved in establishing detailedprocurement strategy to cope with

the clients master programme.

If some packages of work needto be procured at an early stageto meet the programme, the costconsultant will actively participatein the pre-qualification andselection of suitable contractors,

including sourcing internationally,if required. AECOMs experienceand global presence allows us toput together the necessary tenderdocumentation and recommendthe appointment of appropriatecontractors for these packages in

a timely manner

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SUMMA


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Summary

This guide explains the

relationship between the

design and the costs of hotel

development and demonstratesthe benefits of obtaining cost

advice throughout each stage of

the development lifecycle.

Successful hotel developmentrequires not only anunderstanding of the market,

but also the ability to design andprocure the right product at theright price.

To achieve this you need tounderstand the relationshipbetween design and cost andhave knowledge of the latest

technologies, materials, pricesand construction methods.Combined with the knowledge ofhow hotels operate, this ensuresthat you have the right balancebetween capital expenditureand operating costs.

From initial feasibility throughdesign, procurement andconstruction, the role of the

construction cost consultant is key.

We hope that you have foundthis guide a useful source ofinformation and guidance for yourhotel projects. We would welcomethe chance to discuss it with youin greater detail.

At AECOM we offer a range ofservices that meet the developmentand asset management needsof hotel owners, operators anddevelopers from initial feasibilitythrough to planning, design,construction and operation.

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About AECOMAECOM is a global provider of professional technicaland management support services to a broad range ofmarkets, including hospitality, leisure, culture, facilities,environmental, energy, transportation, water andgovernment. With approximately 45,000 employees aroundthe world, AECOM is a leader in all of the key markets that

it serves. AECOM provides a blend of global reach, localknowledge, innovation and technical excellence in deliveringsolutions that create, enhance and sustain the worlds built,natural and social environments. A Fortune 500 company,AECOM serves clients in more than 130 countries.

More information on AECOM and its services can be foundat www.aecom.com.

Kevin Underwood

Global Leader, Leisure + Culture

m: +44 (0) 7768 877382

[email protected]

Paul Nash

Project Management, EMEA

m: +44 (0)7876 396338

Philip Churchman

Cost Consultancy, Europe

m: +44 (0) 7795 043872

[email protected]

Paul Ralph

Cost Consultancy, Middle East

t: +971 4 439 1000

Hotel Build Cost Guide

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Transcript of Hotel Build Cost Guide