As the world continues its pivot away from the COVID-19 pandemic, hotel construction companies are seeing an increase in the number of properties undergoing much-needed renovations. Hotel Business spoke with Aaron Dearborn, president, Amerail Systems; Peter Lanfranchi, SVP, hospitality, HITT Contracting; and Jason Stock, VP, business development, First Finish, to get their take on the state of renovations.
—Gregg Wallis
Many owners and operators put off renovations during the pandemic. Have you seen growth in renovations happening?
Dearborn: With most owners getting a reprieve from their brand to complete renovations during the pandemic, we have been seeing demand skyrocket over the last nine to 12 months. We have customers who are in the normal renovation cycle and now you have two to three years’ worth of customers on top of that, who all have to have their project completed in the next two to three years.
Aaron Dearborn Amerail Systems
Lanfranchi: In March 2020, we saw work and opportunities slow considerably. As the world opened back up and people began traveling once again in 2021 and 2022, we saw a steady increase in new hospitality construction projects. Work that hoteliers put off from 2020 to 2022 is now hitting the market, and we anticipate 2023 and 2024 to be very active.
Stock: Absolutely. While transaction activity has slowed down in the past 12 months, we’re currently seeing a significant volume of renovations occurring on hotels that were acquired at the end of ’19 and in ’20 that delayed their construction efforts the last two years due to market conditions (inflation, war in Ukraine, supply-chain issues and resulting escalation, etc.). When you add the previously postponed “transactional PIPs” to the “brand-mandated PIPs” that were delayed during the pandemic and being built or bid to be built in Q3/Q4 of this year, you end up with nationwide project volume being very, very high.
Have you seen changes to how renovation projects are happening vs. before the pandemic?
Dearborn: A renovation has always been a long process, but lately it seems that getting a project going has become longer. It may take up to a year now just to get to the actual construction. We have seen an increase in the time it takes to get municipality and brand approvals, which then leads to delays in ordering FF&E and construction materials. Every chance we get, we try to advise our clients to start the process as soon as they receive their PIP, and we will utilize value-engineering to get their hotel renovated as soon as possible.
Lanfranchi: We haven’t seen any major differences in how hoteliers are approaching renovation projects now. No special protocols or parameters are needed from the construction side any longer. We are seeing an increase in typical hotel renovations addressing lobby spaces; bars and restaurants; event and meeting spaces; and guestrooms in an effort to attract travelers back to their properties.
We have seen many hotels, such as the Westin in Washington, DC, that have renovated their lobby spaces to be more of a living room-style concept, allowing for a great space conducive for both locals and guests to gather.
Stock: Most larger projects (repositions, conversions, rebrands, deep value-add, etc.) have been trending away from traditional design-bid-build and more towards being awarded based on general conditions, fee and preconstruction while drawings are still being developed. Additionally, these projects are moving ahead with “early-release” or “early-work” packages so that general contractors can engage with trades and/or vendors to review submittals and issue purchase orders several months in advance of how things were done previously to make sure that materials and equipment arrive on time and not adversely affect the project schedule. Subcontractors are being engaged on a more consultative, almost design-assist capacity to help mitigate risk of procuring long lead items.
Where are we in terms of the material supply and supply-chain issues?
Dearborn: We are seeing supply chains improve compared to 18 or 24 months ago. Regarding construction materials, most long lead items can be fulfilled in six to eight weeks. Even FF&E is starting to get back to somewhat pre-pandemic timelines, we are seeing a four-to-six-month lead time for most millwork and FF&E items today.
Lanfranchi: While the supply chain is improving from the past few years, it’s still a lingering issue. We’re seeing the largest delays in FF&E materials. Construction product lead times are improving overall, but to provide our clients with an exceptional building experience, our teams dedicate extra time and effort following up with suppliers to ensure that everything is properly tracking and can meet dates for our projects.
Jason Stock First Finish
Stock: We’re not out of the woods yet in terms of material supply and supply-chain issues, and we’ll likely continue to be challenged for at least the next 12 to 18 months. While most manufacturing facilities have made significant strides in rebuilding their production capacities to pre-pandemic levels, unrealistic expectations, increased project volume and compressed project timelines (and/or budgets) are still requiring that team members explore multiple alternate sources for value engineering, either due to lead times or pricing.
What are some of the challenges you have faced for construction in 2023?
Dearborn: We are currently working to educate our customers on the importance of timing and the increased costs of both materials and labor. We have noticed that many of our projects are taking longer to reach the construction phase, regardless of whether they are design-build or bid-build. While construction material costs have stabilized somewhat over the past six to eight months, they are still significantly higher than pre-pandemic levels. Throughout the pandemic, we learned to be resourceful and adapt to different challenges such as finding certain materials or products. We have discovered that there are always alternative solutions available and as we move forward, this mindset will continue to serve us well.
Lanfranchi: Labor continues to be the most significant challenge facing our industry. Keeping up with a steady increase of new projects, starting many backlogged projects and navigating major supply-chain issues has put a tremendous amount of pressure on design teams, trade partners and builders across the industry.
Stock: In terms of getting the project green-lit, the major challenge remains budgeting. Surprisingly (or perhaps not to some), far too many budgets for projects have been planned and underwritten with ’18, ’19 or ’20 construction cost figures. To make things even more challenging, many groups discount escalation/inflation and believe—or hope—that pricing will return to pre-pandemic levels, which we’re simply not seeing. While we work nationwide and most markets have their unique nuances, lack of labor and labor fatigue (diminished production rates) is real in most major gateway cities and destination markets (beachfront/coastal/mountain). Furthermore, skilled labor shortages across all major disciplines—architecture, interior design, engineering and construction—has resulted in projects requiring much more involvement from senior leadership with legacy knowledge to ensure that projects continually hit their milestones and achieve their targeted schedules.
