Excerpt from CoStar
Owners, Operators Factor in Higher Costs, Longer Waits
Hotel owners and operators must cope with higher material and construction costs and longer lead times deliveries when renovating properties.
An integral part of any hotel’s lifecycle, renovations are ramping up as hoteliers race to head off brand-required property improvement plans and complete updates to meet higher demand from guests.
Many hotel owners and operators who put off projects amid a demand crisis at the height of the COVID-19 pandemic are now financially able to renovate their properties, but face the same challenges as developers of new projects: higher prices and less availability of materials and construction labor.
As a result, projects continue to be prolonged or delayed.
Getting the Goods
Hospitality Ventures Management Group has seven properties under renovation, ranging from updates to soft goods to full interior and exterior revamping, Suzanne Saunders, vice president of design and construction, said in an email interview. While acquiring furniture, fixtures and equipment hasn’t been a problem, the issue lies with lead times, she said.
“A few months ago, we were seeing up to 30 weeks for some items,” she said. “I am pricing out a project right now, and my lead times are 20 to 22 weeks, so we are seeing improvements.”
The wait is longest for electrical components, because they come from Asia and are the most backlogged, she said.
The company is working closely with its purchasing agents and interior designers on vendor selections and paying attention to where the product is manufactured and working collaboratively to buy out the project, Saunders said.
“Before the pandemic, we did not have to pay as much attention to these details because the industry standard was 16 weeks for most FFE,” she said.
OTO Development has multiple projects currently underway, including soft goods replacements, deep repositioning renovations and new hotel development, CEO Corry Oakes said via email.
Lead times have extended significantly, said George Rutledge, vice president of purchasing and technology at OTO Development. For some product categories manufactured in Asia, lead times can be 32 to 36 weeks including transit.
“Logistics, labor shortages and demand are affecting availability, which, in turn, affects costs,” he said. “Inflationary pressures have not eased.”
Recent bids for furniture and finishes that require delivery in the next six months have varied wildly, and all prices are high, he said. Compared to 2019, prices for kitchen equipment are up 8% to 10%, for furniture 3% to 6% and for some finishes close to 70%. Freight charges are up 15% to 20% over the past 18 months, and some container costs have increased tenfold.
Island Hospitality has two branded hotels with full room and public space renovations in the works, said Rob Auerbach, senior vice president of purchasing, by email.
Raw material costs have increased by 25% since 2019, driven primarily by the high price of wood, he said. The cost of chips needed for televisions and charging components have increased by 30%, and the lead times have doubled.
Lead times for finished goods, such as tile and wall vinyl, have extended to eight to 10 weeks, he said. Fabrics, seating and case goods now have lead times of 16 to 18 weeks, up from 12 to 14.
Click here to read complete article at CoStar.