Modular Construction: Hotel Construction & Design

3 min read

Modular Construction: Hotel Construction & Design

Modular construction is revolutionizing building construction, especially in the hotel industry. Instead of having to build the entire hotel from the ground up, modular construction pushes most of the construction to happen off site. This type of construction is incredibly appealing, especially to first-time hotel investors looking for a smart real estate investment.

Historically, the construction for a hotel development occurs on-site. All your raw materials are delivered to the site, where they are assembled by various tradesman and sub-contractors. The foundation is poured and the framework is built. Each floor is set up, and individual rooms are then constructed and finished as mechanical, electrical, and plumbing systems are established.

So what does modular construction offer? Modular construction refers to the modules that are constructed off site and then delivered to the construction site to be connected together. In the case of hotels, this often means that each room is built as a module off site. The rooms are shipped to your construction site and then the rooms are hoisted and stacked and sealed together, very much like legos. Instead of building your entire building from scratch on-site, you are able to construct your hotel into smaller sections that are later placed together. There are numerous benefits to modular construction, including:

Efficiency

Hotels benefit disproportionately from modular construction because most of the guest rooms are essentially the same and easy to replicate. By having most of the construction take place off-site, hotel developers often save time and money in the actual on-site construction, since the rooms are already built. Modular construction minimizes weather delays on site, and simultaneously reduces construction hazards. In addition, because of reduced construction time, there are potential savings associated with construction financing being a shorter term. There are also actual material savings using prefabricated modular construction. The repetitious nature of modular assembly allows carpenters and tradesman to bring material wastage down to a bare minimum. Additionally, construction traffic delays are shorter, and your development timeline is shorter, allowing you to make it to opening day and realize a return sooner. There is probably a good chance that a prefabricated construction company is able to buy lumber, steel, plumbing, and electrical equipment at better prices than most local builders, simply because of their volume and purchasing power.

Quality Management

Mass production allows you to speed up not only construction but also allows developers to have better quality. Modular construction reduces a lot of the variable guesswork in on-site construction from room to room, ensuring that each room’s construction will be consistent and predictable. Even the tiny details like screws and nails go into the exact same place, for each room module. It might also be important to note that indoor factory building doesn’t expose the materials or tradesman to natural elements, especially if you’re thinking about building in a cold or rainy climate. Naturally, the materials stay dry and worker productivity remains high when you’re inside controlled environments.

 

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Conclusion

We predict that modular construction will only get more popular, and will allow hotel developers to speed up their rate of development without sacrificing quality. Moving ahead, modular construction companies are now even offering to build rooms with your FF&E (furniture, fixtures, and equipment) already built in, so hotel developers have even less to worry about when preparing to open doors and getting to revenue.

Sources:
“Why Build Modular?” Modular Building Institute.

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Recent Hotel Construction Spike

Equityroots, Equityroots Inc., Blog, Recent Hotel Construction Spike

Building new-construction real estate has traditionally been viewed as a risky endeavor. Lenders reflect this opinion with higher equity thresholds and more expensive interest rates. However, the recent trend in new commercial development gives us the evidence to rebut this opinion. There are investors and developers who strongly believe the rewards of developing new-construction hotels right now outweigh the risks.

Our legal and land-use experts have studied the real estate market and believe that new-construction hotel assets are the safest bets right now. Newer hotels often boast the latest designs and modern layouts which enhance guest experience. Not only do major hotel brands prefer to see their latest designs, they often protect it— offering area of protection and financial incentives to develop their latest prototype. Don’t forget to consider substantial cost savings in maintenance expenses and energy cost when you have a new-construction hotel asset.

New-construction hotels offer amenities that older hotel designs just can’t match. With the recession over and a strengthening economy ahead of us, business travelers are back in full force and traveling often. It is important to remember that corporate travelers are not price conscious first clients, meaning they don’t have a strict budget for overnight accommodations. Corporations don’t mind spending $15-20 more to keep their employees comfortable in a newer hotel.

New-construction hotels often become high priority targets for institutional investors like REITs and funds. Institutional investors demand the highest quality properties for long-term core holdings. Investing into real-estate that is also appealing for REITs often translates into a very handsome premium at time of disposition.

 

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