by Himank Goswami
Our head of Strategic development during a late evening discussion mentioned to me ‘I can’t make this project viable at this cost; we’ll have to lower the cost in order to match the owner’s budget and make the return on investment numbers lucrative’. Next morning I sat down amending the Area brief, tightening area of each function down to the last square foot and making the circulation more efficient. The guestroom layout plan was reviewed again and I was able to cut down 10 square feet without compromising the functionality of the room (which translated into 2,000 SqFt for a 200 key hotel plus the saving on the grossing factor). I thereafter emailed him the updated numbers and a few days later the deal with the owner was sealed. However, the battle was only half won!
‘Beautiful design’ someone said in a design meeting of the same project a few months later. However, a careful review of the drawings revealed that some functions were assigned more area than recommended by the operator. The circulation was way too high adding up to 20% more area as compared to the initial brief handed over to the architect. The focus of the next couple of work sessions was to bring down the gross area of the hotel in order to keep the cost under check. And this was achieved without compromising the aesthetics, functionality or design.
Every square foot of extra space costs money, air conditioning, maintenance, lighting, future renovation cost and remains a lifelong liability making the return on investment less lucrative & break-even longer.
Hotels are built to generate revenue and it is the responsibility of every stakeholder to contribute in their own capacity to make them money spinners. Controlling area of a Hotel is one of the most important factors in keeping the capital expenditure in check.
Coming across over specified Lobby toilets, overly generous corridors, wasteful storage spaces and BOH areas is not uncommon. Every space gets evolved out of a specific requirement and every requirement should be diligently assessed while assigning an area brief. A restaurant with tables too far apart comes across as an unattractive destination which lacks intimacy. The unwanted extra square feet provided not only dent the finances but also take away from the luxury factor. A high end hotel in Lisbon had an oversized Lobby toilet (that too without a privacy vestibule) and a luxury hotel in New Delhi a 10 feet wide BOH corridor, long as a railway platform.
Building less (or to put it in a better way, building strictly to your needs) is not the only way of controlling cost in a hotel project, here are some more dos and don’ts to be mindful of:
- More you build, the more someone pays: The fundamental rule of the game is simple; the more you build, the more you pay. Every square foot assigned for any function should be carefully considered by the operator and meticulously planned by the Architect. Special care should be taken while assigning and designing guest areas as they cost more as compared to the MEP and BOH areas.
- Negotiations are the key: There are huge margins in some building materials, sanitary ware, Housekeeping, IT, Security and other items. Hard negotiations can save a lot of money in any project. Form a Negotiation committee comprising of multiple functionaries; from purchase to finance, MEP to Interiors in order to negotiate with the contractors, vendors and suppliers.
President of a company proudly narrated an incident to me; the company was planning to buy security equipment for one of their properties. All three vendors who had quoted were called for a meeting where to their surprise an unscheduled reverse bidding started. All vendors tried their best underbidding each other and the final deal was sealed at a whopping 50% of the initially quoted price. That’s the power of negotiation for you!
- Minimize design revisions: Revisions in design during construction stage adversely affect the pace of the project and in turn the cost. Ensure that the design is frozen prior to the construction and avoid carrying out any revisions once a design has been built.
- Look for Alternatives: There may sometimes be an alternative for an expensive tile, sanitary ware or a piece of equipment. Do not hesitate to request the relevant consultant to do some value engineering and suggest an alternate which costs less.
- The time factor: Time plays an extremely important role in determining the cost. Every single day’s delay in opening of a hotel is loss of potential revenue making opportunities. This is especially true in case of a renovation where the owner takes a hard decision of closing an already revenue generating hotel.
- Be mindful of future maintenance cost: Incorporating a full height fabric paneling in a Ballroom could turn out to be a maintenance nightmare as the paneling may be subject to abuse resulting in additional expenditure during the commercial operation of a hotel. Incorporate materials which are durable and maintenance friendly.
Needless to mention that saving cost by compromising quality and brand standards is strictly forbidden. Don’t cut cost, cut down waste!