Companies continue to face project delays

For the last few years, hotel construction companies have had to deal with delayed projects, high construction costs and other challenges. Yet, projects are still getting done. Hotel Business connected with Rod Brooker, president, Brooker Construction Group; Brent Hughes, COO, C.W. Driver Companies; and Roya Vermillion, preconstruction executive, Swinerton, to discuss how business has been this year, the current challenges they are facing and what type of projects they are working on.
—Adam Perkowsky

How has business been so far in 2024? Has your company been able to pick up new projects?
Brooker: This year has been exceptionally busy. Although we have not been awarded any jobs, we are currently bidding four new projects.

Hughes: C.W. Driver Cos. has had an excellent start to 2024. We’ve been able to secure a good amount of work in the first quarter, and it doesn’t seem like it’s stopping anytime soon. We’ve observed the Native American marketplace is especially strong in Southern California, with numerous new hotel towers and additional tower additions to existing hotel properties in various phases of development, from design to bidding.

Brent Hughes, C.W. Driver Companies

Vermillion: Overall, business is good, but in ways different than anticipated. Like many others in the industry, Swinerton has a large number of projects in preconstruction but not many ready to execute. On the private side, we are finding that unless the job secured funding prior to interest rate boosts, project start dates will likely continue to be extended until interest rates fall within the desired pro formas. For instance, we are currently in the preconstruction stage for Chambray Hotel in Historic Downtown Roswell, GA, and expect to begin site work this quarter.

Construction costs continue to rise. How has that affected your company’s projects?
Brooker: There has been no negative effects on our current projects; however, we have had several potential projects put on hold as owners are searching for better interest rates.

Hughes: Rising construction costs have affected some other projects outside of the hospitality sector, but our current owners/prospective owners are adding hotels to existing properties that appear to accommodate the higher construction prices, working within the overall performa of their respective properties. The higher costs are making some components of projects challenging to fit within budget constraints, but some of those components are being deferred for later fiscal years. The overall clear message is: The rooms are key to continuing the financial growth of our clients.

Vermillion: Today’s most prominent challenge is the increase in subcontractor lead times to three-to-four weeks. Today, contractors are hungry for work and seeking public projects and quick-hitting work to reach revenue goals. With that said, on a positive note, we are not seeing the continued, monthly increases in construction costs; now, most material cost is hanging steady without much volatility. However, material availability still poses a challenge, with electrical equipment posting a 12-month lead time.

What are some other challenges your company is facing this year?
Brooker: Timing, material delays due to unavailability and manpower delays have been the biggest challenges. The companies currently working on our projects are having issues with keeping and finding manpower.

Hughes: One challenge we are facing is the exact start date of the projects. The financial landscape continues to shift and experience uncertainties, which causes unexpected delays for ownership groups as they navigate these challenges. As those dates are in flux, it causes challenges on the project team side to align the correct teams for the projects and problem-solve entire teams waiting for their project to start.

Vermillion: In addition to interest rates affecting nearly every step of the development and construction process, a significant labor shortage remains that also slows the process of staffing projects. We partner with organizations such as SkillsUSA and Construction Ready to offer career and training courses for craft individuals, from journeyman to senior superintendents.

Last year saw many renovations being done and new-build projects were hard to come by. Has that changed this year? Why or why not?
Brooker: That hasn’t changed. We are still receiving multiple opportunities for PIPs.

Hughes: C.W. Driver Cos. has still seen recent renovations moving forward, but we’ve also seen a significant number of new-builds and/or a combination of renovation and new. There will always be a need for hospitality, especially in Southern California, and with the upcoming 2028 Olympics, many hospitality clients are looking to refresh the public spaces and guestrooms. All signs indicate the hospitality sector is strongest when there is a casino or a destination associated with the property.

Vermillion: Due to material shortage, increased interest rates and uncertain construction costs, renovations continue to be in demand in 2024, albeit at a slower pace due to the economy and the election year. Many businesses find that renovations offer the benefits of a new “feeling” space while keeping the costs to a minimum.

To see content in magazine format, click here.