Modular hotel construction faces some bumps in the road
Modular hotel construction faces some bumps in the road
09 JANUARY 2019 9:19 AM

Not everything is cut-and-dried with modular construction in the hotel industry. Shipping units and finding construction contractors familiar with the process requires some education for owners and developers.

Editor’s note: This is the second of a three-part series on modular construction in the hotel industry. Read part one: "Benefits of modular construction stack up for owners" and part two: "Brands, lenders developing modular-construction comfort"

REPORT FROM THE U.S.—Modular construction is not a plug-and-play environment for any of the key stakeholders in a hotel development project—owners, developers, contractors or suppliers. The learning curve for such projects often includes playing the waiting game and learning new aspects of construction, according to sources.

One downside to modular construction for hotel projects is the demand, coupled with a minimal number of suppliers, leads to a longer lead time, said Vinay Patel, president & CEO of Chantilly, Virginia-based Fairbrook Hotels and secretary of AAHOA, during the “Current pace of new construction” breakout session at September’s Lodging Conference.

“If I were to do something today with modular construction, it would take 18 months before they could deliver some of the stuff because there is so much demand for this, so today it doesn’t make sense,” he said. “Looking at four or five years down the road when the demand has caught up with supply, then maybe it makes sense. But right now you’ve got a good long lead time as far as getting things to your site.”

Shipping is a major consideration when it comes to modular construction. The modular units are built at the manufacturer’s plant then moved to the hotel construction site—which in some cases can be hundreds, or even thousands, of miles away.

For example, modular units for Mogul Capital’s recently completed dual-branded Courtyard by Marriott/TownePlace Suites in Hawthorne, California, had to be shipped roughly 1,000 miles from the manufacturer in Boise, Idaho, to the construction site, according to Mogul owner and managing partner Brad Wagstaff.

“Your modular manufacturer helps a lot with that, they know how to do it,” he said during a breakout session at October’s New Hotel Construction & Development (West) Conference. “But it’s definitely a factor, it’s a cost factor, it’s a logistical factor, and it’s something you’ve got to factor into the overall project cost to make sure it makes sense for you.”

Other sources agreed.

“The proximity location of where it’s being manufactured has to be weighed into it—transportation costs are the questions that come up from our clients,” said Steven Upchurch, managing director/global hospitality practice leader for Gensler, during a breakout session at October’s New Hotel Construction & Development (West) Conference. “Will it cost me more if I have to pay to transfer it 1,000 miles away?”

“Logistics is a really critical part of modular construction,” added Andy Berube, VP of sales and marketing for Stack Modular Structures, during the NHC&D event. “When you’re running into design unit building, it’s not just about the design and what you can build, it’s the understanding of the factory and how those units travel from point A to point B.”

Knowing road systems is essential for any manufacturer that delivers modular units, he said.

The maximum width for a modular unit is 16 feet, so it can fit on most U.S. roadways, Wagstaff said.

“If you’re one inch out on a build, it may cost thousands of dollars,” Berube said. “If you’re close to a port, you can build much wider because the cost of getting that wide unit from point A to point B is 10 miles, is pretty insignificant. But if we’re talking to somebody, Midwest, for example, we have to consider design and the cost of that design is to transport from point A to point B.”

Julienne Smith, SVP of development and owner relations for Hyatt Hotels Corporation, said during the Lodging Conference discussion that the company’s latest Hyatt Place prototype uses a 12-foot wide room—in part to make it more conducive for modular construction’s shipping requirements.

Knowing the process is important
Understanding how modular units are shipped can provide peace of mind, said Mark Laport, president and CEO of North Carolina-based Concord Hospitality Enterprises Company, during the Lodging Conference session. The company in April 2018 opened a modular-construction AC Hotel by Marriott in downtown Louisville. It sent representatives to see furniture, fixtures and equipment installed in the plant prior to shipping.

“That module was delivered totally done, door locked,” Laport said. “No subcontractor had to enter that room after the connection. Big benefit. We paid more upfront because the rate of funds traveling in the modular project is much more front end.”

Concord Hospitality is open to doing more modular-construction projects as the concept becomes more accepted by the construction trades, according to the company’s CEO.

“The AC Hotel in Louisville went better than I had hoped—Marriott helped with the legwork in the forefront to ensure the process,” Laport said. “We stacked 158 keys in two weeks. Just amazing.”

The costs for using modular construction for that hotel were higher than traditional construction costs, but Laport said it was worth it when weighed against construction time.

“The cost per square foot might have favored, at least on this project, to build a stick build,” Laport said. “However, getting to market in this case before the Kentucky Derby, four months in advance, that net real savings.”

Laport said there is a noticeable difference in cost for transportation if a construction site is more than 500 miles from the manufacturer.

The other aspect of modular construction is finding a staging site to store the units as they arrive prior to construction, he said.

“It’s a lot of work, but we would definitely do it again,” Laport said. “We did price one in Columbus, Ohio, and actually spent money designing the building … both stick and modular. In that case … it’s stick build. Modular was not the best option.”

Contractors, labor still learning
Finding contractors and subcontractors familiar with modular construction can be a challenge, sources said.

“We found in the case of Louisville, it was an educational process because local subs, local plumbing contractors are used to a lot of work, now we’re asking him to do a lot of fast connections at a fraction of what his contract would have been,” Laport said. “To get the right number from that plumbing contractor is challenging, right along with electrical and all the other contractors. I think that’s why our deal in Columbus fell apart because the local subs were giving us numbers that did not make sense. That will abate over time, but right now that’s a big challenge.”

“It’s a very limited crowd,” said David Bader, managing principal for Cumming Construction Management, during the Lodging Conference session.

Laport said his company looks for consultants and architects who have previous modular experience to engage in their projects.

“You really need to change your thinking as to what is the team,” Laport said.

Laport was bullish on the evolving modular construction scene. Concord saved four months of time by using the concept on its AC Hotel in downtown Louisville, Laport said.

“It worked out beautifully, and we will undoubtedly do it again,” Laport said.

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