Amid Hotel Boom, Rising Costs of Renovation Make Savings Hard to Find…..Unless You Have a Good Project Manager

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Dec 21, 2015

By: Ryan Mathews, Marketing Manager, JLL

Owners of hotel properties in the San Francisco Bay Area face a conundrum:  the economy, buoyed by tech sector expansion, is pushing hotel occupancy and average daily room rates higher.  A study this summer conducted by Bloomberg showed that average room rates in San Francisco had leaped by 88 percent to $397 a night, making it the priciest destination among the world’s top financial centers.  For hotel owners, it’s a good problem to have, but the flip-side is competition to win guests is becoming harder, and hotels have to both show well and provide up-to-date amenities to command the highest room rates.

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This is causing owners to reevaluate the renovation cycle for many hotels.  No longer can owners skate by without refreshing common areas, amenities and, most importantly, rooms.

Yet, the same trends that are pushing hotel room rates higher in the Bay Area are also pushing the cost of renovations, especially labor and materials, higher.  And, as costs rise, so too does the likelihood that renovation projects will overshoot budgets, meaning that investors and owners have to wait longer to see a return on their investment.

One way to approach this conundrum is to hire an experienced Project Manager to supplement the team at the very start of the planning for a renovation project.

Sonia Greenlee, a hospitality expert in JLL’s Project and Development Services group, says that if a project manager is engaged early enough in the process, there are usually opportunities to save money during all phases of a typical project.

“One of the biggest savings come from on time completion in order to minimize revenue displacement, but to get to that point the project manager can add value to the project by helping with team selection, planning, site investigation, budget validation and management, bidding and construction management as well as other key areas of the project,” she says.

“Firms like ours can also bring great pricing options to projects through our industry relationships and partnerships,” she adds.

JLL recently saved a hotel client $350,000 just by having an early discussion on performance criteria with the designer of a hotel’s audio-visual and mechanical/electrical system.  “It shouldn’t be unusual for a good project manager to save more than their fee on a typical hotel renovation project,” Greenlee says.

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