Owners, developers work around challenging locations
 
Owners, developers work around challenging locations
11 SEPTEMBER 2017 8:27 AM

Every hotel project comes with its own set of issues, but hotels on islands, in national forests or otherwise geographically isolated areas can be particularly challenging for owners and developers.

REPORT FROM THE U.S.—Hotel construction and renovation projects are enough of a challenge on their own for owners and developers trying to meet deadlines and control costs, but some locations complicate matters by sitting in far off locations and requiring extra planning and greater expense.

Hotel News Now reached out to owners and developers of hotel projects in Hawaii, Alaska and Yellowstone National Park to see how they’ve worked through the challenges presented by their isolated locations.

Weather conditions
Affinity Hospitality recently developed the Hilton Home2 Suites Midtown Anchorage, and the Marriott Courtyard Midtown Anchorage is fully approved and should break ground this fall. The company is also planning a yet-to-be-flagged full-service hotel and an economy extended-stay property, among other hotel construction projects, founder and Principal Richard Marko said.

The development and construction of hotels in Anchorage is similar to work in secondary markets in the lower 48 states, he said, but there are some differences. There are winter condition costs and higher shipping and logistics costs, plus foundation work is often done under a heated dome.

“Winter condition costs and productivity loss directly related to severity of winter can be quite significant,” he said. “Cold-climate design and construction requirements add significant cost to a hotel.”

Delaware North purchased the Holiday Inn West Yellowstone when it was under a property improvement plan in 2009, regional VP of parks and resorts Derek Zwickey said. In these types of markets, the hotels do a tremendous amount of business during the summer and some in the winter, leaving a short window of opportunity for renovations, he said.

“We try to complete these projects within 90 days,” he said. “We sometimes finish in 60.”

Adding to the challenge of seasonal business requirements, West Yellowstone can at times have 14 feet of snow on the ground, Zwickey said. Interior and exterior renovations under these conditions see roughly a 20% cost differential, he added.

Logistical concerns
Consolidation, transfer and ocean freight costs significantly add to the price that’s typical for overland freight in the lower 48, Marko said.

Renovating hotels in national parks can require almost a full year of planning, Zwickey said. It’s important to have everything on site prior to starting the project, he said.

Delaware North learned that lesson the hard way when purchasing carpet for a property in Yellowstone that took two weeks to ship from Atlanta, putting the project behind schedule.

“We now have a policy where everything is in boxes before the contractor shows,” he said.

In remote areas, there’s no such thing as next-day shipping, Zwickey said. If a property needs something, it’s going to take a week or two to receive it.

“Preplanning: that is really important,” he said. “We have a good facilities department in Delaware North. We’re blessed with project managers that understand that and help buffer our times.”

R.D. Olson Development has more than 30 years of construction experience in Hawaii, and six or seven years’ experience as a hotel developer in the island state. Building a hotel in Hawaii is difficult, President and CEO Bob Olson said, citing two properties on Maui. It becomes even more so when developing on one of the outer islands, where goods and services are scarce.

“The first order of business: Everything arrives by ship or plane,” he said. “All materials come from elsewhere other than the Hawaiian islands.”

His company has one foot in Hawaii and another on the mainland, he said, so it can source and have materials premanufactured and shipped over.

“That’s the key—being able to premanufacture as much as we can,” Olson said.

First, materials have to be delivered on time. Shipping to a site on Oahu can take 10 to 12 days, and that increases to 18 to 24 days from the shop to a job site on Maui, he said.

“Everything has to go through Oahu, and then it ends up in another local ship to go over to Maui,” he said.

Developers need to build into their schedules the shipping time from California to the shipyard in Oahu, he said, and then the time to unload the ships, have the containers identified, go through regulatory checks and then deliver to the site.

Maui’s total construction cost is about 1.8 times what it costs for a similar project in southern California, he said, while for Oahu, it’s about 1.4 times the price.

“You have to understand how to most efficiently build,” he said. “It’s not just cost but time. A lot of people try to source in the Hawaiian Islands, but it just won’t get done in any timeframe that makes sense.”

Labor costs
Hiring labor for renovation projects in national parks is extremely difficult—especially finding subcontractors who want to travel to these locations, Zwickey said.

“To help with that, we put them up in lodging,” he said. “We provide some amenities … to make it easier for contractors and subs to come down.”

For the Holiday Inn West Yellowstone, the contractor brought in workers from California, including some who had never seen snow before. But bringing in out-of-state workers adds to the overall cost, Zwickey said.

“Some just don’t want to work in that environment,” he said.

Skilled labor shortages are common in the Anchorage area, Affinity Hospitality’s Marko said, and wages run much higher than in other states.

The bulk of the labor in Hawaii is locally sourced, Olson said. When working in a different market, it’s important to understand the cultural differences in the workforce to get things done, he said.

“We hear a lot of mainland builders and contractors have so much frustration getting things done; for us, (it’s) the contrary, we get excellent quality from the workforce there,” he said.

The biggest labor challenge is the limited availability. When the economy is doing well, as it currently is, it’s difficult to find the labor force needed, he said.

The shortage of manpower for construction also drives up costs, Olson said.

Sometimes going with local services works against the project, he said. An architect on Hawaii might take 10 months to work on drawings when it would take only four on the mainland, he said.

“They’re overwhelmed,” he said. “They don’t have the resources to put on a project, especially (one) the size of a hotel. For a group to have that ability locally to put that together is difficult.”

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