Hotel Build Cost Guide - Maximising Value

 
Hotel Build Cost Guide - Maximising Value
Leisure + Culture

Hotel Build Cost Guide
Maximising Value
Hotel Build Cost Guide - Maximising Value
Hotel Build Cost Guide - Maximising Value
Contents

01 Introduction        04

02 Design              08
		 Design Guidelines   12
		 Area Schedule       26

03 Cost                32
		 Cost Drivers        36
		 Cost Planning       46
		 Cost Models         52

04 Procurement         66

05 Summary             76

06 Contact Details     Back Cover
Hotel Build Cost Guide - Maximising Value
Introduction

At AECOM we offer a range
of services that meet the
                                      This guide explains
development and asset                 the relationship
management needs of
hotel owners, operators and
                                      between the
developers from initial feasibility   design and the
through to planning, design,
construction and operation.
                                      costs of hotel
                                      development and
Before there is a design, there is
an idea for a hotel. Assessing the
                                      demonstrates
feasibility of a hotel development    the benefits of
requires you to understand what
the market opportunity, needs
                                      obtaining cost
of the market and cost of the         advice throughout
development are.
                                      each stage of
                                      the development
                                      lifecycle.

4: INTRODUCTION
Hotel Build Cost Guide - Maximising Value
Hotel Build Cost Guide - Maximising Value
Hotel Build Cost Guide - Maximising Value
Based on outline information          Once the design is complete
about the type and size of hotel      the next step is to procure a
product and the amenities that        contractor to undertake the
the market requires, the cost         construction of the hotel. This
consultant is able to provide an      requires an understanding of
initial cost estimate to inform       the various procurement options
the development appraisal.            available to achieve the right
                                      balance between price and risk.
During the design phase,
understanding the way in which        This guide does not provide all
the design of a hotel can influence   of the answers but it will provide
the cost can help ensure that the     the reader with an understanding
correct choices are made at the       of the important relationship
earliest stages of a project and      between the design and the
will avoid expensive re-design and    cost of a hotel and the benefits
cost in use.                          of obtaining cost advice at each
                                      stage of the development process.
By providing an analysis of cost
by area and function, the cost
consultant’s advice will ensure
that costs are being allocated
to those parts of the hotel that
will deliver the best return on
investment over the lifecycle
of the asset.

                                                            INTRODUCTION :7
Hotel Build Cost Guide - Maximising Value
DESIGN
Hotel Build Cost Guide - Maximising Value
Hotel Build Cost Guide - Maximising Value
Understanding the way in
which the design of
a hotel influences
the cost means that
the correct choices are
made at the earliest
stages of a project
and avoids expensive
re-design and cost in use.
Design guidelines
Food and beverage outlets
Food and beverage outlets and          Most luxury hotels will have at
restaurant requirements vary by        least two restaurants but some
location and hotel type. However,      hotels operating at the upper levels
a good rule of thumb is to provide     of the market can offer up to four or
restaurant seats ranging from          five different types of restaurants.
0.75 to 1.2 times the number of        Generally, there will be a main all-
guestrooms. This does not take         day dining area that serves as the
into account specific requirements     main breakfast area in the morning
for conferences, functions or          and can be converted into lunch
banqueting, for which additional       and dinner venues with different
provision will need to be made in,     settings. The restaurant dining
or adjacent to, the function suites.   area is calculated on the basis of
                                       an area-per-seat allowance. This
                                       allowance varies between about
                                       1.5 to 2.5m² per seat, depending
                                       on the style and mode of operation
                                       of the venue. Further allowances
                                       should be made for the service
                                       stations and circulation space
                                       within restaurants.

12: DESIGN
Lounges and bars                     Meeting and function rooms
A hotel is also likely to have a     Ballroom / banquet hall
number of lounges and bars. The      While many major hotel chains
seating capacity allowance for       have their own design and area
these ranges from 0.5 to 0.9 times   guidelines for the capacities
the number of hotel guestrooms.      of a ballroom / banquet hall, a
The area calculation is made on an   minimum size would be in the
area-per-seat basis.                 region of 750m². The general
                                     allowance for calculation of the
Kitchens, storage and support
                                     net area of the ballroom / banquet
areas are excluded from these
                                     hall is in the region of 1.20m² per
area calculations. Kitchens are
                                     seat. The minimum total number of
calculated as food preparation
                                     seats is the equivalent of 1.5 to 2.0
areas and form part of the back
                                     times the number of guestrooms.
of house and support areas.

                                                                  DESIGN :15
Junior ballroom                        Pre-function areas /
and function rooms                     break-out space
In addition to a main ballroom /       These should be approximately
banquet hall, the hotel may have       33% of the area of the ballroom,
a junior ballroom and smaller          banquet hall, junior ballroom,
function rooms. A junior ballroom      function and meeting rooms.
typically has a seating capacity
of 400 to 500 people.
                                       Support areas
Function rooms that double up as
meeting rooms should be a series       All of the above areas exclude
of rooms catering for groups of        supporting areas such as furniture
20 to 50 people. There should be at    stores, restrooms, general storage,
least three of this type of function   AV control rooms, interpreters’
room. In addition, there may be        rooms and so on. As a rule of
a provision for a boardroom with       thumb, these would be allowed on
a size of around 50m². The total       a square metre per seat basis.
capacity of the function / meeting
rooms should be in the proportion
of approximately 0.5 times the
number of hotel rooms.
Essential for all function suites
is the concept of flexible meeting
spaces, allowing for changes
in shape, and size by means
of acoustic, sliding / folding
partitions. Each potential
function area must be able to be
serviced separately.

16: DESIGN
General public areas
The general public area of a hotel   (c) Commercial space
may include:                         These spaces are often let out.
                                     Often there are around four to five
(a) Business centre, including
                                     such outlets in the hotel.
• A reception / waiting area
                                      (d) Front lobby and front office
• A secretarial area                 This covers the main entrance
                                     lobby, which should be a generous
• A small conference /
                                     space. The area allowance is
  meeting room
                                     calculated on the basis of a square
•    Small booths / offices          metre per hotel room. Supporting
                                     the main entrance lobby is the
(b) Health club / fitness centre
                                     lobby waiting area. An allowance
Space should be allocated for:
                                     is made for 20 people on the basis
•   An entry area                    of 2.3m² per person. These areas
                                     generally have higher or double-
• Common facilities such as
                                     volume ceilings and pricing should
  reception, examining room and
                                     take this into account.
  nurse’s room
• A beauty centre
• A men’s and women’s spa
• A fitness centre and gymnasium
• A spa restaurant / juice bar
• Employee facilities such as
  lockers, lounge and restroom

                                                                 DESIGN :17
Back of house, support
                                     and services areas
Provisions should be made for        These are the non-public areas of
male and female restrooms, with      the hotel. There should be minimal
the female restroom slightly         interior designer’s input for these
larger to allow extra space for a    areas, except for some of the
vanity area. A janitor’s room is     offices. The spaces occupied under
also required to store cleaning      this category include:
equipment. A further allocation
                                     (a) Administration and
is made for a reception desk area
                                     service areas
together with a front office. As a
                                     The administration and
guide, 1.75m length is assumed for
                                     service areas include various
each workstation at the reception
                                     departmental offices, such as:
desk. One workstation is required
for every 75 rooms. A width of       • Front office support containing
1.5m is allowed for working space      the office of the front office
behind the counter and a width of      manager and credit manager,
4m is allowed for guest queues in      telephone operator’s room,
front of the counter.                  cashier’s room and counting room.
                                     • Safe-deposit box, stationery
                                       storage, general office and pantry.

18: DESIGN
• Executive offices containing      • Catering / banquet offices
  the offices of the general          containing the offices of the
  manager, resident manager,          catering manager, banquet
  food and beverage manager,          representatives, convention
  assistant food and beverage         services and secretarial area.
  manager, general office areas,
                                    • Accounting offices containing
  executive boardroom
                                      the offices of the financial
  and storage.
                                      controller, assistant financial
• Sales offices containing the        controller, accounting work
  office of the sales director,       area, payroll manager, general
  sales manager, market analyst,      office and storage and men’s
  sales executives, group sales       and women’s restrooms.
  co-ordinator, public relations
  manager, reservations manager,
  general office, conference room
  and storage.

                                                               DESIGN :21
(b) Food preparation, support         • Storage areas containing
and service areas                       storage for dry food, refrigerated
                                        food (cold rooms), beverages,
Food preparation and service areas
                                        refrigerated beverages,
include support spaces for various
                                        ballroom liquor, the service bar,
departments, such as:
                                        silverware, chinaware,
• Food preparation, main and            glassware, utensils and
  support kitchens containing           stewards’ and janitors’ rooms.
  production kitchens supporting        Area calculations are generally
  the banquet hall and function         made on the basis of an
  rooms, kitchens for the various       area per seat for food storage
  restaurants, bakery / pastry          supporting the kitchens, and
  shop and offices for the              area per key for general storage.
  executive chef and room               Generally, storage areas will be
  service manager. Area                 in the region of 30 to 50% of net
  calculations are generally            total food preparation areas.
  made on the basis of area per
  seat. Alternatively, as a general
  guide, an area equivalent to 40%
  of restaurant net areas would
  make up the kitchen areas.

22: DESIGN
• Service entrance areas               • Housekeeping areas
  containing areas for the loading       containing offices of the
  dock and truck parking bays,           executive and assistant
  receiving areas, receiving office,     housekeeper, housekeeping
  office for the purchasing              clerks, seamstress, fitting
  manager, purchasing                    rooms and storage for linen,
  department, security /                 supplies, lost and found, uniform
  timekeeper, flower shop                and uniform-issue rooms.
  storage, trash holding area, wet
                                       • Laundry areas containing the
  garbage refrigeration area, can
                                         laundry and valet office, laundry
  wash, garbage compactor,
                                         room, soiled linen sorting
  empty bottle storage,
                                         area, guest laundry area, valet
  refrigerated storage for
                                         service room, supplies storage
  food, employee entrance area,
                                         and compressor room.
  compressor rooms and the like.

                                                                  DESIGN :23
• Area calculations for               • Mechanical areas usually cover
  housekeeping and laundry              two major locations, one of
  areas are generally made on           which is normally in the
  the basis of area per key of          basement, the other on the
  the hotel. Requirements for           upper level or roof space of
  laundry facilities will vary          the hotel.
  between locations and between
                                      • Mechanical areas in the
  operators. In many instances,
                                        basement contain the
  the laundering of bedsheets
                                        engineer’s control room,
  and towels is outsourced. If so,
                                        engineer’s office, toilet and
  the requirements for in-house
                                        locker, janitor room, boiler
  laundries are limited to a small
                                        rooms, fire control pump rooms,
  number of domestic machines.
                                        electrical sub-stations,
• Engineering areas containing          electrical rooms and wet riser
  offices of the engineering            tanks.
  director, assistant engineer,
                                      • Mechanical areas in the
  general maintenance and
                                        upper levels can contain the
  secretary, paint shop, carpentry
                                        air handling units, domestic
  shop, upholstery shop, plumbing /
                                        water tanks, sprinkler tanks,
  refrigeration shop, electrical
                                        wet riser tanks, condenser
  shop, key shop, TV repair shop,
                                        water storage tanks, electrical,
  parts storage, energy
                                        switch and power rooms,
  management computer room
                                        although these may also be
  and janitor’s store.
                                        housed at the basement level if
                                        space allows.

24: DESIGN
(c) Employee facilities
Employee facilities areas include
spaces for:
• Human resources office
  containing rooms for the
  personnel manager, assistant
  personnel manager,
  interviewing, training manager,
  training, first aid application
  and storage.
• Employee areas containing
  staff lockers and shower areas,
  toilets, dining and recreation
  areas. If not provided in the
  feasibility study or the business
  plan, the number of employees
  can be calculated on the
  basis of employees per key. For
  five-star hotels, the range can
  be from 1 to 1.5 employees per
  key. The changing and locker
  areas are generally based on
  area per employee.

                                      DESIGN :25
Area schedule

Using functional area data              The area allowances must of
from previous projects and from         course be tested against other
operators’ standard requirements,       hotels of similar standard in the
it is possible to create a reasonably   geographical region, to check
accurate assessment of the space        that it is competitive. Ideally, the
requirements for a hotel.               market feasibility study provides a
                                        suggested high level area program
This can form the basis of
                                        based on market requirements.
preliminary budget calculations
for a hotel of a particular standard    A preliminary budget costing
with a stated number of rooms and       for a hotel development can
ancillary functions (restaurants,       be generated quite quickly and
fitness, spa, banqueting and so on)     efficiently, based on data for
in advance of the development of        similar existing hotels, design
any design.                             criteria of major hotels and
                                        knowledge of the market. This
The hotel area schedule must,
                                        includes setting the number of
therefore, be based on realistic
                                        hotel room bays and keys and
numbers. Any gross over or under
                                        the total seating capacities
allowance of areas would cause a
                                        for food and beverage outlets,
distortion of the forecast cost.
                                        entertainment lounges, banquet,
                                        ballroom and meeting facilities. It
                                        should also cover the capacity of
                                        the health club facilities and the
                                        size and number of retail outlets.

26: DESIGN
Worked example based on a luxury hotel

		                               Bays        Keys    Total bays

A. Standard guest rooms
1. King rooms                       1         200          200

2. Queen rooms                      1         100          100

3. Accessible rooms                 1           20          20
(circa 5% of total room count)

4. Other standard rooms             1           55          55
(eg twin)

B. Suites
1. Junior suites                    2           40          80

2. Executive suites                 3           10          30

4. Presidential suites              5            2          10

5. Club lounge                      5            -           5

Total		 427                                                500

Based on the above configuration, the total number of bedroom bays is
500 and the total number of keys is 427 – about 85% of the total number
of bays.
Typical total area allowances
for luxury hotels vary around
the world, from circa 80m² to
over 120m² of gross floor area
(excluding parking and external
areas) per bay. Hotels in more
Western locations tend to have
smaller bedrooms than those
in the Middle East or Asia. A
500-bay five-star hotel could
therefore be expected to have
a range of gross floor area of
between 40,000 to 60,000m².

                                  DESIGN :29
The breakdown between the
bedroom zone, public areas and
back of house for a notional 500-
bay, 50,000m² hotel would be:

A. Guestrooms and suites         22,500 to 30,000m²     55 - 60%

B. Public area                   10,000 to 15,000m²     20 - 30%

C. Back-of-house                    7,500 to 12,500m²   15 - 25%
   administrative, support
   and services areas

Hotel total gross area40,000 - 57,000m²        100%

Based on the above hotel floor          The net areas of the bedrooms
areas, the gross area per bay           (including bathrooms) varies
ranges between 80 to 115m².             according to geographical location,
                                        from a low of about 35m² up to
                                        about 55m² but typically between
                                        40 and 50m² net bedroom area is
                                        a good guide
COST
By providing an analysis
of cost by area and
function, the cost
consultant is able to
ensure that costs are
allocated to those parts
of the hotel that deliver
the best return on
investment over the
lifecycle of the asset.
Cost drivers

The major cost drivers of a hotel      h. The level of provision and
development include:                      facilities of rooms
a. Site location, shape, conditions,   i. The storey height – if
   means of access and visibility         exceptionally high, it will
                                          need a heavier structure,
b. Position of the hotel in
                                          more complex foundations,
   the development
                                          additional lifts and fire-
c. The shape and form of the              fighting installations
   building
                                       j. Location of function rooms.
d. The external facades,                  One major impact on the cost
   particularly the extent of             of the structure is the location
   glazing and cladding                   of the main function room or
                                          ballroom. The ballroom should
e. The level of sophistication
                                          not be located directly below
   of building services and fire-
                                          the hotel guestrooms tower,
   protection systems
                                          as it requires column-free
f. Particular requirements of the         space that is difficult and
   chosen hotel operator                  expensive to accommodate and
                                          is likely to require the
g. Shape and layout of the
                                          introduction of transfer
   guestrooms zone, particularly if
                                          structures at the base of the
   this is a tower
                                          guestroom tower

36: COST
The choice of guest    Another area for careful
                       consideration is the location of
room configuration     the bank of guest and service
                       lifts rising up to the guestrooms.
    can affect area    These should be located centrally
                       to the guestroom block and the
   efficiency by as    guest lifts should descend into the
                       entrance lobby, where pedestrian
      much as 20%      traffic can be monitored by the
                       front desk.
       of the gross    A third major consideration is the
                       configuration of the guestroom
         floor area.   block, particularly if this is in
                       the form of a tower. Analysis
                       shows that some shapes and
                       configurations of a guestroom
                       tower yield more cost-effective
                       solutions than others. In fact, the
                       choice of configuration can affect
                       the area efficiency by as much as
                       20% of the gross floor area.

38: COST
Ideally, the efficiency of the        The following factors must be
guestroom zone should be in           considered:
the region of 75%for a tightly
                                      a. Number of guestrooms
designed, double-loaded
                                         per floor
corridor layout. However, for a
single- loaded corridor or atrium     b. Lift location and escape
layout, the efficiency can drop          staircase cores
as low as 60%. Obviously, the
                                      c. Shape of guestroom tower, as it
higher the efficiency, the more
                                         affects the wall-to-floor ratios
economical the construction cost.
It is critical to ensure the design   d. Corridor configuration
is economical without sacrificing
the design intent. Due to the
multiplier effect of having many
floors in the guestroom zone,
minor differences or inefficiencies
can have a major impact on the
construction cost.

                                                                    COST :39
A limiting factor of the number of      A guestroom tower may take
guestrooms per floor is the local       various plan shapes, ranging from
authority building code requirement     rectangular to circular, triangular,
for fire evacuation, which is           curved or offset. It has been
controlled by the distance between      proven that the most efficient
fire-escape stairs. In a tower, an      shape is generally rectangular,
optimum number of guestrooms            with a double loaded corridor
would be in the region of 16 to 24      configuration.
rooms per floor if only two fire-
                                        Curved and circular shaped
escape stairs are envisaged.
                                        towers will involve higher costs
This ratio also facilitates efficient   because of non-standard room
housekeeping. Increases in the          bays and panelled or faceted
number of rooms per floor can           glazing. Architects may opt for an
trigger the need for additional         approach to maximise views from
fire-escape stairs and additional       the guestrooms to accommodate
lifts. This in turn may require the     the often narrow site, but there is
lift core to be increased in size,      a cost premium to this and this
with its corresponding increase         choice should be scrutinised.
in gross floor and elevation
areas leading to an increase in
construction costs.

40: COST
Typical guestroom layout
Guestroom sizes are generally          Examples of different
standardised. For a five-star hotel    configurations are shown below.
it would be rectangular in shape,
in the region of 40 to 50m² net
area inclusive of sleeping area and
bathroom. Some developers or
designers may attempt to provide
larger and odd-shaped rooms
which may not be economical.
                                       The single-loaded corridor configuration is
Good workable dimensions are
                                       less efficient as the corridor serves only one
approximately 4.5m by 9.1m. The
                                       set of guestrooms. Efficiency is in the region of
width should not be excessive,
                                       65% or less.
as it increases the length of the
corridors, the cost of the structure
and affects the external walls of
the bedroom zone.

                                       The double-loaded corridor configuration
                                       is efficient, with one single corridor serving
                                       guestrooms on both sides. Efficiency is in the
                                       region of 70 to 75%.

42: COST
The offset configuration is the most efficient
configuration in terms of accommodating             The rectangular configuration is not efficient,
more rooms per floor, with minimum effect on        as it requires additional corridor lengths to
external walls and finishes. Efficiency is in the   serve end rooms. Efficiency is in the region of
region of 75%                                       65% or less.

                                                                                             COST :43
The triangular configuration provides
inefficient space for the central core. The
corner rooms are odd-shaped. Efficiency is
likely to be below 65%.                       The atrium configuration is served by single-
                                              loaded corridors, which reduce efficiency.
                                              Though it may provide an opportunity for
                                              glass elevators, there is a cost premium.
                                              Smoke extraction and an extra premium for
                                              roof construction is a major consideration.
                                              Efficiency is likely to be around 60%.

44: COST
The circular configuration may have shorter
corridors but it is a challenge to design
efficient room space, especially in relation to
the location of the bathroom. The central core,
where the lifts, housekeeping and fire-escape
stairs are located, will determine the floor area.
It is unlikely to achieve efficiency beyond 70%

                                                     COST :45
Cost planning

Cost planning is typically done in
two stages. The first stage involves
an initial order of magnitude
costing or cost appraisal. This
usually takes place before any
designs have been produced,
and is based on available cost
data and past experience of hotel
projects of comparable standard,
together with an understanding of
the current market trends.
The second stage involves
more detailed cost planning
based on design information
procured specifically for the
particular project.

46: COST
Initial order of
magnitude costing
Using benchmarked area               Our cost consultants are wary of
data, a preliminary schedule         hotels with, for example, unusually
of all functional areas in           large or extensive restaurants,
the hotel is made based on           conference facilities, health clubs,
outline information about the        suites or other unusual facilities
hotel’s market position, the         that skew the comparative
recommended type of hotel            calculation by increasing the
product, and the amenities the       cost per key without perhaps
market requires. This produces a     significantly affecting the cost per
reasonably accurate estimate of      square metre.
overall gross constructed area.
                                     For any such ‘unusual’ hotels,
Based on this preliminary            further discussion with the
area schedule, the estimated         developer is advisable to ensure
construction cost for the hotel      that his requirements have been
is calculated. This is usually       accurately captured. An initial
done both on a cost per square       cost prepared on a $/m² should,
metre basis and on the basis         however, be more reliable.
of a cost per bedroom or key,
using historical benchmark data
collated from similar projects.
Assuming that both calculations
produce answers in the same
‘ballpark’, it is likely the hotel
design is reasonably efficient.

                                                                   COST :47
With the preliminary costings in         This review process may be
place, a construction cost cash-         repeated a number of times
flow forecast is prepared, based         until the developer arrives at
on the estimated time required to        a financially viable scheme
carry out the design, procure the        that yields the required target
right contractor and then build and      profitability. In this way, a budget
fit-out the hotel. The results of this   is refined and set for construction
cash-flow study give an indication       of the hotel and the developer
of the likely draw-down of the           is given the confidence in his
funds throughout the construction        viability calculations to give the
of the hotel to allow developers         go-ahead to proceed to the next
and investors to assess the need         stage of the project.
for, and cost of, funding.
The construction cost consultant
then works with the developer
and the design team to review
and modify the scope and nature
of the hotel design, and the
corresponding construction cost.

48: COST
Detailed cost planning
The developer’s design team          This may involve a value-
should design the hotel to           engineering (VE) process, carried
provide the functional areas         out with the construction cost
necessary to meet the hotel          consultant guiding the designers
operator’s requirements within       by using analyses and benchmark
the constraints of the approved      comparisons with other hotel
budget. The construction cost        projects. All cost elements are
consultant costs the design and      scrutinised for efficiency in design
prepares an initial cost plan that   and whether they add value to
breaks down the cost of each         the hotel. Our construction cost
element of the building into         consultants, who are well-versed
smaller, more identifiable and       with the various cost drivers of a
manageable items.                    hotel development, share their
                                     knowledge and experience with
The cost plan is fine-tuned to try
                                     the design team, challenging
to make sure that firstly, overall
                                     and being challenged, thereby
costs fall within the targeted
                                     maximising the value and
budget and secondly, that the
                                     effectiveness of the hotel building.
spread of the expenditure is about
right – ie the money is being
spent on those elements which
are customer facing or affect the
operating costs of the building
– and therefore improve the
potential viability of the scheme.

                                                                   COST :49
The construction cost consultant    The initial budgeting process
may suggest alternative             minimizes time spent pursuing
construction methods and            design options that are either not
advise on the range of products     affordable or do not produce the
and materials available in the      required financial return.
market that are within the
allowable budget, from which the
architects and interior designers
can then select.
Once the preliminary designs
are completed and have been
checked to remain within budget,
the construction cost consultant
compiles all the information into
a final detailed cost plan that
is distributed to the developer
and consultants. This defines
the design intent and the agreed
budget to which the developer and
design team should adhere.

50: COST
Construction
cost consultants
share their
knowledge and
experience with
the design team,
challenging and
being challenged,
thereby maximising
the value and
effectiveness of
the hotel building.

                      COST :51
Cost models*
Europe
                              Spain

                                  TOTAL USD    USD/m2 (GBA)    USD/key      %
                              		                    8,544 m2   153 keys

 Structure and envelope            6,072,299            711     39,688     19%
         Internal fit-out          1,667,432            195     10,898      5%
       Building services          11,027,489          1,291     72,075     35%
                On-cost            7,062,250            827     46,158     22%
                   FF&E            5,819,339            681     38,035     18%
         External works              263,350             31      1,721      1%
                    Total         31,912,160          3,735    208,576    100%

* Cost models based on a mid-market product
52: COST
Russia

  TOTAL USD    USD/m2 (GBA)    USD/key      %
		                  8,544 m2   153 keys

   6,493,440            760     42,441     29%
     358,848             42      2,345      2%
   5,510,880            645     36,019     24%
   3,740,300            438     24,446     17%
   5,615,579            657     36,703     25%
     854,400            100      5,584      4%
  22,573,447          2,642    147,539    100%

                                                 COST :53
United Kingdom

                             TOTAL USD    USD/m2 (GBA)    USD/key      %
                           		                  8,544 m2   153 keys

Structure and envelope        7,800,037            913     50,981     26%
        Internal fit-out      3,785,507            443     24,742     12%
      Building services       7,543,701            883     49,305     25%
               On-cost        5,197,200            608     33,969     17%
                  FF&E        5,819,339            681     38,035     19%
        External works          263,350             31      1,721      1%
                   Total     30,409,134          3,559    198,753    100%
Cost models*
Middle East
                                Dubai

                                    TOTAL USD        USD/m2 (GBA)       USD/key      %
                                		                          8,544 m2    153 keys

Structure and envelope               5,885,147                    689    38,465     23%
        Internal fit-out             3,022,309                    354    19,754     12%
      Building services              6,289,284                    736    41,106     25%
               On-cost               4,250,100                    497    27,778     17%
                  FF&E               5,356,243                    627    35,008     21%
        External works                 351,767                     41     2,299      1%
                   Total            25,154,850                  2,944   164,411    100%

* Cost models based on a UK mid-market product.
The equivalent product in the Middle East is a budget product
56: COST
Qatar

  TOTAL USD    USD/m2 (GBA)    USD/key      %
		                  8,544 m2   153 keys

   8,116,800            950     53,051     24%
   3,844,800            450     25,129     11%
   8,116,800            950     53,051     24%
   3,844,800            450     25,129     11%
   9,825,600          1,150     64,220     29%
     427,200             50      2,792      1%
  34,176,000          4,000    223,373    100%

                                                 COST :57
Saudi Arabia

                             TOTAL USD    USD/m2 (GBA)    USD/key      %
                           		                  8,544 m2   153 keys

Structure and envelope        5,002,375            585     32,695     23%
        Internal fit-out      2,568,963            301     16,791     12%
      Building services       5,345,891            626     34,940     25%
               On-cost        3,612,585            423     23,612     17%
                  FF&E        4,552,807            533     29,757     21%
        External works          299,002             35      1,954      1%
                   Total     21,381,623          2,503    139,749    100%

58: COST
Cost models*
Africa
                              South Africa

                                  TOTAL USD    USD/m2 (GBA)    USD/key      %
                              		                    8,544 m2   153 keys

Structure and envelope             3,875,822            454     25,332     24%
        Internal fit-out           1,380,676            162      9,024      9%
      Building services            5,598,122            655     36,589     35%
               On-cost             2,808,660            329     18,357     18%
                  FF&E             2,136,503            250     13,964     13%
        External works               146,327             17        956      1%
                   Total          15,946,110          1,866    104,223    100%

* Cost models based on a mid-market product
60: COST
Nigeria

  TOTAL USD    USD/m2 (GBA)    USD/key      %
		                  8,544 m2   153 keys

   6,965,981            815     45,529     24%
   2,496,952            292     16,320      9%
  10,076,620          1,179     65,860     35%
   5,055,780            592     33,044     18%
   3,845,742            450     25,136     13%
     263,389             31      1,721      1%
  28,704,464          3,360    187,611    100%

                                                 COST :61
Nairobi

                             TOTAL USD    USD/m2 (GBA)    USD/key      %
                           		                  8,544 m2   153 keys

Structure and envelope        3,978,504            466     26,003     24%
        Internal fit-out      1,243,969            146      8,131      8%
      Building services       5,080,700            595     33,207     31%
               On-cost        2,821,440            330     18,441     17%
                  FF&E        3,281,781            384     21,450     20%
        External works          160,960             19      1,052      1%
                   Total     16,567,354          1,939    108,283    100%

62: COST
Cost per key analysis
Based on a mid-market hotel

 250,000

                                                                        FF&E
                                                                        Excluding FF&E

 200,000

 150,000

 100,000

  50,000

      0
           UK

                Spain

                        Russia

                                 Dubai

                                         Qatar

                                                 Saudi Arabia

                                                                South Africa

                                                                               Nigeria

                                                                                         Nairobi
Cost/m2 analysis
Based on a mid-market hotel

                                                                         FF&E
                                                                         Excluding FF&E

   4,000

   3,500

   3,000

   2,500

   2,000

   1,500

   1,000

    500

      0
           UK

                Spain

                        Russia

                                 Dubai

                                         Qatar

                                                 Saudi Arabia

                                                                South Africa

                                                                               Nigeria

                                                                                         Nairobi
PROCUR
REMENT
Selecting a contractor
to undertake the
construction of the
hotel requires an
understanding of the
procurement options
available to ensure
that the right balance
between price and risk
is achieved.
Procurement

Having completed the cost
planning process, agreed a
budget and scope of work and
received the go-ahead from
the developer to proceed to the
next stage, the construction
cost consultant advises on the
most appropriate procurement
approach for the particular blend
of time, cost and quality that
relates to the hotel project.
Every project is different,
and it is important that the
choice of the most appropriate
procurement route and the
selection and pre-qualification
of potential contractors for the
project is carefully considered.
Even the best cost plans will be
undermined if the wrong choice of
contract or contractor is made or
if the design information on which
the contract is let is incomplete or
of poor quality.

70: PROCUREMENT
The three most commonly                The main advantage of completing
encountered forms of                   the design before construction
procurement for hotels are briefly     commences is the fact that the
described below:                       contract cost is established in
                                       advance of entering into the
                                       contract and work starting on site.
Traditional lump sum
                                       The cost risk to the developer is
Traditional lump-sum contracts,        therefore relatively low. Control of
based on full bills of quantities or   design and quality remains largely
priced schedules of work, provide      in the hands of the developer and
an essential means of letting          the design team.
and cost managing the work as
                                       If properly set up and
it proceeds. However, they do
                                       administered, this can be a good
require all design to be finalised
                                       form of contracting to produce a
and detailed, and complete
                                       high-quality hotel.
documentation to be prepared
before going to tender, which
takes time and the overall life of a
project is therefore usually longer
using this route. Careful planning
and interfacing of, for example,
the interior design with the main
building works can reduce the
impact on the master programme.

72: PROCUREMENT
Design and build
The design and build (d+b) approach      The contract price is based on
needs a clearly stated set of            the contractor satisfying these
requirements, setting out in detail      requirements while leaving a
those parts of the finished hotel        significant part of the design,
that are important to the developer      particularly the detailed design
or hotel operator (for example,          development, to the contractor.
the finishes to the public areas or      The perceived lack of control by
the performance of the services          the developer over quality issues
installations, but not necessarily the   may lead to compromises by
detail of how the main structure is      the builder despite the design
put together) but without producing      team often being novated to
full design documentation.               the contractor. This is a good
                                         and usually cost-efficient form
                                         of contracting for reasonably
                                         standard, repetitive types of
                                         hotel such as budget lodges and
                                         branded mid-market hotels. It is
                                         less often used for luxury, five-
                                         star hotels.

                                                              PROCUREMENT :73
Construction management
The construction management         This approach is often used on
(CM) approach, where the work       large or complex hotel projects
is let under a series of smaller    where making a quick start on
individual trade contracts under    site, before the whole design
the management of a specialist      is completed, is important in
construction management             order to minimise the overall
company, can provide programme      duration of construction. Careful
advantages but may expose the       consideration of all factors is
developer to greater cost risks.    needed before proceeding down
This is because the out-turn cost   this procurement route.
(end cost) is not known until the
                                    A modified version of this
last trade package is agreed.
                                    method can be used where,
This construction management        part way through the design
approach also does not              and procurement process, the
provide the developer with a        contractor warrants the cost by
single point of responsibility      providing a guaranteed maximum
for the construction works,         price (GMP), usually including
which developers might see          a premium cost to reflect the
as a disadvantage. It requires a    additional risk he is taking on.
much greater involvement by         Any savings achieved within the
the developer, in dealing with      GMP are shared between the
individual trade contracts and      developer and the contractor
package contractors.                in a predetermined proportion,
                                    thereby creating an equitable risk-
                                    sharing arrangement.

74: PROCUREMENT
Procurement management
The cost consultant will be actively
involved in establishing detailed
procurement strategy to cope with
the client’s master programme.
If some packages of work need
to be procured at an early stage
to meet the programme, the cost
consultant will actively participate
in the pre-qualification and
selection of suitable contractors,
including sourcing internationally,
if required. AECOM’s experience
and global presence allows us to
put together the necessary tender
documentation and recommend
the appointment of appropriate
contractors for these packages in
a timely manner

                                       PROCUREMENT :75
SUMMAR
RY
Summary

This guide explains the              From initial feasibility through
relationship between the             design, procurement and
design and the costs of hotel        construction, the role of the
development and demonstrates         construction cost consultant is key.
the benefits of obtaining cost
                                     We hope that you have found
advice throughout each stage of
                                     this guide a useful source of
the development lifecycle.
                                     information and guidance for your
Successful hotel development         hotel projects. We would welcome
requires not only an                 the chance to discuss it with you
understanding of the market,         in greater detail.
but also the ability to design and
                                     At AECOM we offer a range of
procure the right product at the
                                     services that meet the development
right price.
                                     and asset management needs
To achieve this you need to          of hotel owners, operators and
understand the relationship          developers from initial feasibility
between design and cost and          through to planning, design,
have knowledge of the latest         construction and operation.
technologies, materials, prices
and construction methods.
Combined with the knowledge of
how hotels operate, this ensures
that you have the right balance
between capital expenditure
and operating costs.

78: CONCLUSION
About AECOM
AECOM is a global provider of professional technical
and management support services to a broad range of
markets, including hospitality, leisure, culture, facilities,
environmental, energy, transportation, water and
government. With approximately 45,000 employees around
the world, AECOM is a leader in all of the key markets that
it serves. AECOM provides a blend of global reach, local
knowledge, innovation and technical excellence in delivering
solutions that create, enhance and sustain the world’s built,
natural and social environments. A Fortune 500 company,
AECOM serves clients in more than 130 countries.

More information on AECOM and its services can be found
at www.aecom.com.

Kevin Underwood                      Philip Churchman
Global Leader, Leisure + Culture     Cost Consultancy, Europe
m: +44 (0) 7768 877382               m: +44 (0) 7795 043872
k.underwood@aecom.com                phil.churchman@aecom.com

Paul Nash                            Paul Ralph
Project Management, EMEA             Cost Consultancy, Middle East
m: +44 (0)7876 396338                t: +971 4 439 1000
paul.nash@aecom.com                  paul.ralph@aecom.com

Margreet Papamichael                 Neels Heunis
A total fitness programme
Economics, EMEA                        for your
                               Cost Consultancy,  Africa
m: +44 (0) 7973 347843         t: +27 11 666 2000
hotels      portfolio
margreet.papamichael@aecom.com neels.heunis@aecom.com
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