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| HotelWorld Network » Spending Costs Steady Construction | Log in |
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As the lodging sector rebounds from the construction slowdown of the early 2000s, construction spending has boomed in 2007. As of August 2007, construction spending in lodging was up 64 percent from 2006, while material costs seem to be increasing at a slower rate and labor remains available in most areas, making for a relatively strong year, according to the Associated General Contractors of America's October Construction Inflation Alert.
 Waterford Hotel Group built a Homewood Suites by Hilton in Ithaca, N.Y., last year. The $13-million, 91-suite hotel opened in May. Robert Winchester, president and c.o.o. of Waterford Hotel Group, said new-builds are a feasible option this year. "When you're deciding, 'do I buy something or do I build something,' when you're able to build something and it's at or near what you can buy it at, you probably want to build it because new is good," he said. |
Construction costs still might be on the rise in some markets, but overall, they are not experiencing a rise as dramatic as the one that inundated the industry from 2004 to 2006, industry experts said.
"Some materials continue to go up, such as petroleum-based products," said Glenn Ahlborg, president and c.o.o. of The Procaccianti Group.
This is noted by the fact that as of August 2007, the producer price index since December 2003 of crude petroleum (domestic production) was up 137.9 percent, and the PPI for plastic resins and materials was up 38.1 percent, according to data from the Bureau of Labor Statistics.
Other materials, such as steel, copper and brass mill shapes, saw large increases, according to AGC's inflation alert. John Stone, president of J.P. Stone Construction, said he experienced a 15-percent increase on his steel bill in 2007.
Yet Ahlborg said he's found prices of some materials, such as gypsum, wood and cement, actually have been slightly on the downswing.
Another positive of recent months is the availability of labor.
"In most regions of the country right now, labor is readily available and there are ample skilled craftspeople to get the job done," Ahlborg said.
However, in some renovation-heavy areas like New York and the Northeast, or in areas with strong union membership, it might become more difficult to get workers, he said.
And to get these workers for cheap: "Union labor prices are through the roof and very unexplained," Stone said.
As winter weather arrives, it also brings in additional construction costs for new-build properties. Robert Winchester, president and c.o.o. of Waterford Hotel Group, said certain conditions might affect when you start a project, so as to reduce the temporary heat needed for the building or tenting of specific areas.
Making sure the timing is right is just one aspect of keeping costs down. Efficiency in project management is key, including well-thought-out plans, fewer change orders and better specs for the bidding process, Winchester said. Stone emphasized the importance of efficiency "along the whole board of construction, from computers to labor."
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