construction report

 

Construction companies in the hospitality industry continue to be optimistic about their opportunities for projects in 2017 and those to come, despite there being a mixed bag of results in 2016. Hotel Business caught up with Edward Albanese, owner of DDB Contracting LLC; Matthew Hogan, president of Hogan Brothers Construction International; and Stuart Sell, president of construction at BriMark Builders, LLC, to discuss the state of hospitality construction in 2016 and beyond. 

Has 2016 lived up to your expectations? Why or why not?
Albanese: I would say 2016 exceeded our expectations. We had the privilege to work on some very interesting renovation projects. Great design and complexity always make a project exciting for us, as well as turning someone’s vision into something tangible. It’s the challenge of the task; resolving conflicts in the field; remaining on schedule; and figuring out how to improve as a team. It also requires the assessment and ultimate solving of the ongoing issues of working in an up-and-running hotel. When the project is completed, and the vision is realized, you truly appreciate when someone stops by to tell you how wonderful it looks and what a great job was done by all.
Hogan: It actually went beyond our expectations. We have been fortunate enough to recently finish a wonderful hotel project for The Witkoff Group and Carlyle Group called The Washington Park Hotel located in Miami Beach. We are also working on a large renovation to The Loews Hotel and a 400-room renovation to The Continental hotel, both of which are located on South Beach, among others. The South Florida market has been booming with lots of construction work.
Sell: While 2016 didn’t quite live up to our expectations, it wasn’t a total failure either. We built the same amount of projects in 2016 as we did in 2015. As with everyone else, we expected to build more hotels than we did in the previous year. While we didn’t meet that goal, we also didn’t go backwards and do less. So, I will take that as a small victory.

Has the reported increase in hotel supply made it very difficult to find new projects?
Albanese: For us, specifically, it has not. In 2012, we saw an opportunity to grow as a company within the hospitality segment of the industry, and decided to pursue it. We had extensive experience working in hotels already but, as a company, our work was not as focused on this segment. Hospitality is still a relatively new market for us, and we have continued to grow in that portion of the industry. We have the added enjoyment of spreading our reputation and finding new sources of work, which in turn, expands our overall customer base and allows for other sometimes-unforeseen opportunities.

Hogan: No, there is so much work that some companies have to turn projects down at times. Being based in Miami has opened up lots of opportunities for us, even allowing us to expand through central Florida and nationally. We have projects starting in the first quarter in Albany, NY, and Anchorage, AK, as well as several ground-up projects in preconstruction. Due to this increase, we have brought on new team members including Keith Wynne, our director of hospitality, who has helped build more than 60 hotels nationally, and Claire Lutz, our VP of business development, who has brought several new hotel projects to the table. We will also be licensed in the 13 southeastern states by 2017.

Sell: The short answer is no. The Cobblestone Hotel franchise, whom we primarily build for, has a niche in small-town USA. With the Cobblestone Hotels being around 40-60 rooms, they are geared toward the smaller markets; markets that haven’t been tapped at all yet by other hotel chains. The only competition in those markets is your mom & pop motels and maybe a one-off hotel. There is an endless supply of small towns in this nation, whereas the larger markets have been and are flooded.

Where is your company finding new projects? What hotel segments are they in?
Albanese: Typically, our project leads have always relied on word-of-mouth. Past clients, architects and the reputation we have built all help to spread the word with respect to who we are and what we can accomplish. Our projects usually consist of large-scale renovations. Since this is such a new segment for us, we have added online marketing and even hired a full-time sales/customer satisfaction position to look into other opportunities for us. We want to make sure the lines of communication are always open, and our customers are completely satisfied with the services we provide in order to sustain those relationships.
Hogan: Most of our projects are located in Florida, from limited-service, boutique hotels to five-star hotels. We are running in all sectors.
Sell: This past year was exciting where we have moved into three new states that we haven’t built in before. We started our first projects in Wyoming, Ohio and Idaho in late 2016, which brings us to 14 states we have built in. These three particular hotels are Cobblestone Hotels, which are in the upper-midscale classification. These hotels are geared toward small towns, and there will always be an unlimited potential of sites compared to the larger markets.

What is your forecast for the hotel construction industry in 2017?
Albanese: DDB sees great things. In the past couple of months, we’ve added a few new clients, and are very excited to begin working with them on projects scheduled to begin this January. We hope to continue to expand our customer base and build new relationships with hospitality management companies nationwide. Our goal is to begin seeking work in new areas. We have one of the largest backlogs of work in our history since starting in the business in 1987, and we have only positive outlooks for the future.
Hogan: We see an increased amount of volume and work for the entire industry and us. I do not see it slowing down anytime soon, especially in South Florida.

Sell: In the latter part of 2016, we have already noticed an uptick in hotel construction. There have been many more leads out there at this time of year compared to the same time in the last two years. As of right now, we have 10 in the ground or breaking ground shortly. I believe 2017 will be a good year for us. I truly believe that we will build at least 15 hotels, if not more. The last few years have lagged slightly due to construction costs. Materials have increased in the typical percentages as they have in the past, but labor costs were the main issue the last few years. Skilled trades have been having a very hard time filling skilled positions, which, in turn, raises rates. But, I am seeing a trend of labor costs leveling out and actually decreasing slightly as those positions are slowly being filled. Hopefully, that trend continues upward into 2017 and beyond.