Mr. Heller

Executive Leadership

How to Keep a Small Hotel Renovation Project Under Budget

By Jed Heller, President, The Providence Group

Rejuvenation of your hotel, whether it be new carpets and drapes in guest rooms or an upgrade in the ambience and functionality of the common areas, goes a long way towards protecting your assets as well as maintaining superior guest services. However, to achieve or exceed your long term ROI goals, it is crucial that renovation costs stay in line with your budget. It is very easy for even the smallest project to get out of control and create a "money pit" of unexpected expenses, cost overruns, labor issues and inconvenient delays.

There are many twists and turns that can occur during a renovation that can strain your patience and assault your project budget. Fortunately, there are tried and true practices that will help you navigate the minefield and complete your project on time and on budget. The key factors to keep in mind when planning your renovation are:

• Choose an experienced project manager
• Create a detailed scope of work
• Assess cost estimates and timelines
• Document the budget
• Hire the appropriate contractors
• Manage the process If care is taken to properly address all of these areas, your renovation project should go off smoothly with minimal disruption to your operations and your guests.

Engage the Right Project Manager

The project manager is key to success and should possess a number of skills ― time management , attention to detail, ability to develop a work schedule, set goals, create/implement actions plans, monitor progress towards goals, and make clear, timely decisions. He or she is the project maestro, organizer and traffic cop and needs to fully understand every component of the project. If there are multiple contractors involved, the project manager is the one who will ensure that each contractor has fulfilled their part of the project as expected and be sure that the next contractor is ready to go. If your renovation project involves plumbers, drywallers, painters and carpet layers, for example, there is an orderly progression of work that needs to be completed before the next stage can begin. It only takes one contractor to muck up the works - perhaps they can't start when expected, they may be having labor issues, or encounter other unexpected problems. Any of these problems can contribute to project delays and cost overruns.

Who should manage the project? For larger projects involving multiple contractors, it often makes most sense to hire a construction firm and use their experienced supervisor to manage the project and oversee the various stages and subcontractors involved. They should have the expertise and understanding to keep the project on track, from both a timeline and cost perspective. For smaller projects, it might make sense for the hotel general manager to oversee the project, but only if they have had some experience dealing with contractors. And it is important to understand if your general manager truly has the time, skills and inclination to manage a project as well as perform their daily management tasks. If not, your project may be at great risk.

Create a Detailed Scope of Work

The project manager needs to precisely determine the scope of work to be performed, the length of time required to complete the project, and create a plan to execute the project without major disruptions to guests. At this time, it may be determined that it will be necessary to close the hotel during the renovation for a period of time or map out a plan where only a certain number of rooms are renovated at a time, enabling revenue to be generated during the process. Either way, detailed requirements and specifications for each phase of the project should be identified and documented.

Choosing the Right Contractors

Once you have an accurate assessment of the project and have created a detailed scope of work, it's time to go out to bid.

You should obtain at least three proposals. Keep in mind that while you will be attracted to the lowest bid, you may not be satisfied with the lowest bidder. Each bidder should have a long list of references and they should be diligently checked. Understand who will be doing the work - the construction company or their subcontractors - and be sure that they have actually performed this type of work. It is not uncommon for a general contractor to submit a bid on a project without having their own internal experience, then hire a subcontractor with expertise in that specific area once the bid has been accepted. It is imperative you know that everyone working on your project is reputable and trustworthy and that they are licensed and insured.

Your contractors should also have experience in dealing with building inspectors and other building officials and be capable of pulling the appropriate permits.

And, ask your colleagues for referrals. If you know other hotel owners in the area or attend business meetings with your colleagues, ask them if they have had any personal experience with a contractor or have recommendations. Often times they will be your best source of information to assess and select the contractor as well as providing valuable input in the planning and execution of the project.

Make sure that you also build in accident contingencies into the contracts. If a plumber changing a fixture accidentally breaks a pipe, who is responsible? Or if a drywaller accidently cuts a wire in the wall, who pays for the cost to bring in an electrician?

For small renovations, often times owners will use their own staff to handle the project. In this case, be sure they have the expertise to do the job, they adhere to the project timeline in addition to handling their regular responsibilities, and understand expectations and overtime guidelines in advance.

Document a Project Budget

Once you are aware of labor and material costs, document your assessment in a budget and be sure there are not hidden costs. For instance, your carpet installer may give you a fair estimate for the carpet and installation, but is there an additional fee for disposing of the old carpet? The budget should take into account labor charges, keeping in mind overtime, night or weekend fees. The budget should also reflect accurate materials costs - if it is a long term project, is there any chance that materials costs could increase over time based on changing market conditions? If so, it is a good idea to anticipate cost changes (they rarely go down) and build in any potential material cost increases into the budget - better to be prepared upfront.

Build contingencies into the budget. Sometimes accidents are unavoidable and costly and its best to set aside a contingency fund for worst case scenarios.

Communicate Regularly

It is the project manager's job to lay out the guidelines for each contractor - be sure they know when they can start work and when they need to finish so the work in progress is seamless or minimally disruptive to your guests. Determine how and when they will clean up on a daily basis. It is also imperative that the project manager communicates regularly with the contractors - meet weekly and go through the checklist of project milestones to be sure that everything is progressing as it should. Changes are inevitable and it is the project manager's responsibility to be sure that the owner is aware of and signs off on any change orders.

Good communication will identify potential snags, delays or potential cost overruns. Upon completion of work, it should be quality inspected to be sure it meets the agreed upon specifications before moving to the next phase.

Enjoy the Fruits of Your Labor

A well managed renovation project will be on budget and on-time. You will have improved the value of your physical assets while improving your guest satisfaction and repeat business. While the project may seem daunting, proper management will ensure a smooth execution.

Jed C. Heller is CEO of The Providence Group LLC, which provides management services to hotels and timeshare resorts. Heller has managed all phases of three start-up ventures, two as the operating partner. He was the president of Goodmanagement, vice-president of The March Company Inc., and president of Premier Hotel Corp., He began his career with Winegardner and Hammons in Cincinnati, Ohio. Heller serves on the editorial board of Hotelexecutive.com and the Resort Management Committee of the American Resort Development Association. Mr. Heller can be contacted at 781-582-8785 or jcheller@providencegrp.com Extended Bio...

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