How to Run a Successful Hotel Renovation

construction liability risk hotel insurance

By David DeMoss

While renovating a hotel can be an exciting time, it is also a very intensive process that requires a lot of planning. Not only must you analyze the hotel structure itself to collect key information, but staffing is an important component as well. Confirming that the general contractor (GC) identifies any potentially dangerous situations before starting construction is vital. The GC must also be prepared for any challenges that may arise and communicate with the hotel operator when necessary.

In addition, ownership needs to confirm the proper insurance coverage is in place. Some GC’s will ask about a Builder’s Risk policy, but most primary property policies will allow for renovation, with no additional premium, if you maintain a minimum percentage of the hotel open during the renovation. If you can plan the construction to maintain the open percentage required by your property policy throughout the project, you can avoid the expense of a Builder’s Risk policy. Also, make sure the GC has acceptable liability limits and names the hotel ownership as ‘Additional Insured’ on the GC’s policy. This is important because the hotel’s general liability policy probably excludes construction exposures. More details from Brian Lowder, below.

The reasons for renovating a hotel can vary—repositioning the brand, adding capabilities that make the property more competitive, conducting post-disaster repairs, or simply adhering to prudent periodic maintenance. Whatever the reason, hotels typically plan to stay in operation during rebuilds, so construction must be completed as efficiently as possible with minimal impact on the guest experience. Below are four time-tested planning guidelines for achieving that goal.

Walls Can Talk

To manage such a complex project effectively, it’s vital to gather as much information as possible about the building’s existing conditions. For older hotels and historic properties, consulting as-built drawings, when they are available, isn’t a fail-proof strategy—blueprint sets are unreliable tools because they are often missing sheets. With cloud-based electronic documentation increasingly replacing paper drawings, this is gradually becoming a problem of the past.

Once preliminary assessments are made, hidden hazards may still exist. Responsible contractors will perform an initial survey on each floor as it is shut down for the renovation to help identify possibly dangerous situations. This “discovery phase” can expose risks such as mold growing behind wallpaper, or traces of asbestos mastic under the floor or in mirrors and at tub surrounds. Remediation plans can then be incorporated into the renovation budget and schedule.

The Personal Touch

While analyzing the structure itself is an indispensable way to gather information, don’t overlook the human component. Interviewing the hotel’s engineering staff can reveal operational problems. Troubleshooting the performance of building systems, from slow-draining sinks and toilets to anemic air conditioning, will add to the body of knowledge on the project.

Why go to all this effort before starting a renovation? It’s simple: To ensure sufficient funds are allocated to fix these problems at the beginning of the budgeting process. Don’t spend contingency fees to resolve issues that, with a little more up-front work, could have been factored into the plan from the outset.

Keeping the project’s schedule is another reason why this preliminary work is so important. If an unexpected obstacle is encountered on site, days or even weeks may be added to the timeframe as any necessary change orders are written, approved, and finally implemented in the field.

Building the Team

With so many moving parts and so much at stake in hotel renovations, there’s no substitute for an experienced construction manager. Coordinating communications between hotel operations and the general contractor is an ongoing and essential role. A decision by one group can affect all the other timelines and project budgets. Being proactive on the front end is the best way to ensure the project is well-defined and that there will be money to mitigate any issues without a significant impact on contractors, subcontractors, or ownership. Keeping all stakeholders continually informed will minimize those costs.

The other important team member is the general contractor, whose experience in hotel renovation should be non-negotiable. GCs will be faced with an array of challenges, from the obvious to the mundane. They must have the know-how to deal with work that is exceptionally disruptive, such as noise from bathroom demolitions reverberating throughout the hotel. They must seamlessly manage the periodic shutdowns of systems providing water, electricity, gas, and telecom/data services. Coordinating with hotel operators, they will plot wayfinding paths so that contact between guests, staff, and construction laborers is kept to a minimum.

GCs know the intricate dance of working room-to-room, sequencing trade workers in the most efficient and logical order to turn around floors or half-floors at a pace that maximizes the productivity of work crews. Parceling out the job in this way also establishes a kind of “early warning system.” For instance, if the drywallers fall short of their daily room quota, it raises a flag about potential schedule lags and the domino effect that would impact other trades. But expectations should be realistic—overcrowding a floor with too many workers can lead to quality-control issues, and a skilled general contractor can recognize that.

A more broad-based benefit that general contractors bring to hotel renovations is a sense of the local labor market. With shortages of skilled workers continuing to affect many cities, contractors have on-the-ground knowledge of when and which qualified subs are available. Using this information, they can give feedback on a schedule that might be too aggressive.

Rooms available

More than many sectors, hotel construction is subject to regular cycles of activity. Right now, the cycle is peaking. Analysts at Lodging Econometrics reported that U.S. hotel construction continued to expand at the end of the first quarter of 2019, with 5,647 projects totaling 687,941 rooms in the pipeline—up a strong 7 percent by projects and 8 percent by rooms year-over-year. Proactive cost and project planning and collaborating with quality partners can help ensure both profitability and client satisfaction during hotel renovation projects.

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