Cost model: Hotels

2006 issue 48 | By Neal Kalita

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Related Articles
 Inn recovery: The hotels market
11 December 2009

Tables
 Cost breakdown
 Location factors
A hotel lives and dies on the quality of its service, but that relies on constructing the right kind of environment in the first place.
Neal Kalita of Davis Langdon breaks down the costs

01 Introduction

The annual turnover of the UK hotel industry is about £27bn, with close to 22,000 hotels and guest houses, according to the British Hospitality
Association.

The amenities offered tend to be defined by the market sector served. Generally, the higher the standard of hotel, the greater the level of
additional facilities.

The hotel sector has undergone significant change in recent years. A number of major branded owner/operators have sold a large proportion of
their property portfolio to investors.

Entering into leasing or management arrangements allows the hotelier to generate significant amounts of cash to reinvest in their product and
concentrate on what they do well: running hotels rather than managing property.

02 The changing client profile

The shift towards sale and leaseback has placed greater emphasis on the split between the operator and the developer. Put simply, the developer
is now responsible for the construction and maintenance of the asset while the operator is responsible for implementing the brand.

Developers and their investors are willing to accept the risk profile of non-guaranteed income, because this can be improved through effective
asset management. The long-term value is mainly generated by service quality and is facilitated by building a high-quality environment in the first
place.

In addition, the developer has to balance the needs of the operator and avoid over-specification, while retaining flexibility, since the operator may
change over time.

On the other hand, the operator needs the space, provision, build quality and facilities to enable it to establish a hotel that is closely aligned to its
brand standards. Areas that are of particular importance include bedroom size and circulation capacity.
 03 Procurement

As with all construction projects, the balance between cost, time and quality is a vital factor. The balancing act is further constrained in the hotel
sector as there is usually a fixed budget and an opening date.

A limited budget will affect the level of specification and, to minimise cost risk, dictate that the majority of design work be completed before
entering into contract between the developer and the contractor. This may extend the project programme.

Likewise, working to a fixed opening date on a relatively short programme may result in higher costs to meet quality expectations and provide
extra resources to complete the job quickly. Selecting the right strategy largely depends on the following issues:

 Cost/programme/quality priority as defined by the client

 The type of relationship required between client, design team and contractor
 Whether single or multi-point responsibility for delivery is preferred
 The spread of cost, time and design risk between client and contractor
 The complexity of the project. For example, new build, mixed use, tower, conversion, refurbishment
 The planned use of off-site manufacturing
 The degree of repetition possible in the design and variations
 Whether the project is part of a bigger portfolio of future work.
The most common procurement methods for UK hotels are traditional, lump-sum design and build, and refinements of those systems such as
two-stage tendering.

The reputation of construction management has been dealt a severe blow in the hotel sector on recent projects and although legal action
associated with the Great Eastern Hotel established the construction manager’s liability, most developers think construction managers exposes
them to too much risk without additional return.

Design and build is usually suited to less complex hotels offering a turnkey solution. However, design and build has delivered very high-quality
environments. The conditions that achieved this were:

 The client ensured the scope of works and design were clearly defined and fixed for the duration of the programme
 The design team dealt with buildability issues specific to the site in the design phase
 A design team with experience of resolving intricate relationships of the functions of the hotel building was appointed
 The brand aspirations of the operator were clearly communicated to the design team.
Value can be added by concentrating the budget on areas that enhance service quality or the guest experience, or by increasing the certainty of
delivery. All three are largely defined by the brand values and commercial requirements of the operator.

04 Guest rooms: layout and building services

The organisation of guest rooms on the floorplate and the impact this has on the room mix affects the hotel’s ability to maximise occupancy and
hence revenue.

Guest room sizes are by and large uniform, have a high degree of repetition and can be accommodated with a relatively short structural span. By
contrast, public areas require a clear span to accommodate amenities. Other issues that affect floorplate configuration include core location,
vertical circulation requirements and the need to comply with escape legislation.

Most hotels offer a mix of standard and executive double and twin rooms, with a small number of suites of varying sizes.

Single rooms are usually avoided but may be incorporated when an existing structure is being converted to hotel use, or where the efficiency of
an irregular floorplate can be maximised by introducing single rooms. This is more common in “boutique” hotels.

Guest rooms are defined by three basic measurements: the width, the length of the room from the external wall to the bathroom wall and the size
of the bathroom. Bedroom widths generally vary from about 3.6 to 5m.

In general, the net floor area of a budget guest room is 20-22m2. Mid-range hotels vary from 30 to 40m2 and, at the luxury end of the market,
guest rooms can be 50-60m2 and beyond.

Suites including a lounge are usually formed from a number of modules and may be up to 200m2 in area. Corridors are 1.2 to 3m wide. Rooms
should be designed to facilitate cleaning and short turnaround periods.

Most guest rooms nowadays are designed with an internal bathroom. This allows for an economical system of externally accessed service risers
and helps with sound insulation from corridor noise. The downside is that the bathroom requires artificial lighting and ventilation.

Where cooling is specified, the room fan coil unit should be located in a position that provides maximum diffusion without creating drafts or
excessive noise. The most common position is in a bulkhead over the entry corridor to the room (horizontal air discharge). This allows air to flow
along the ceiling while maintaining accessibility to the ducts. Systems should also be compact in size and simple to use.

This last point is important since rooms are not occupied all of the time. An intelligent building management system that detects when rooms are
occupied and facilitates central control can contribute to a reduction in energy costs. Once in the room, the guest should be afforded some level of
individual control of the room services, allowing them to turn it off, up or down to suit their own comfort levels.

Reliable, efficient mechanical plants support profitable hotel operations. The chillers and air handling units, for example, must operate efficiently at
part loading but some redundant capacity should also be incorporated in case of failure.

Another issue is the testing and commissioning requirements for building services, which have often proven difficult to achieve. This is because
these services are usually extensive in terms of quantity and complex due to the diversity of functions supported in the building.
 Sufficient time at the end of the programme needs to be allocated to this critical activity as the reliable operation of room services could potentially
have a significant impact on overall service offered.

05 Public areas

Public areas include lobby, restaurant, bars, breakfast rooms, function spaces, leisure facilities and retail areas. The design of M&E services to
these areas needs to take into account the following:

 Heating and cooling available all year

 Independent units for each main public area
 Efficient operation at part-load and low-load conditions.
The load on the M&E system is generated from internal sources including people, lighting and activities such as cooking in a show kitchen. The
lobby may operate 24 hours a day whereas the restaurant, retail and leisure facilities have fixed periods of operation and varying occupancy
levels, which result in frequent load changes.

Further flexibility can be introduced to the services system through the use of separate, packaged plant that provides dedicated heating and
cooling to areas of high and/or variable loads.

The lobby needs to be planned carefully in order to facilitate circulation and navigation to the support amenities. It must also be designed to
create an initial welcoming impression that sets the tone for the hotel.

Revenue-generating elements such as the restaurant, bar, retail offering (typically a kiosk), function spaces and leisure amenities need to be able
to accommodate both guests and external customers.

Restaurants should be located with direct access to the kitchen, be visible from the lobby and located alongside the bar.

The area that has the largest impact on the design of back-of-house operations is the main kitchen, as its position can determine circulation
routes. Circulation of staff and guests between back and front of house should be segregated as far as is pragmatic.

The design of meeting rooms needs to consider size, divisibility, complexity of services and the quality of finishes.

These spaces must be adaptable for small meetings, banqueting, dances, conferences or exhibitions. Folding partitions must be soundproofed to
allow adjacent spaces to be occupied at the same time. A separate entrance from the hotel foyer to the function room reception and from the
breakout area to each individual space is recommended. Electrical, power and communication services need to be incorporated in order to
maximise usage of these revenue-generating facilities.

A back-of-house services corridor allows effective circulation for catering and servicing of events. Space for storage of furniture and so on should
be incorporated.

06 Sustainability

Sustainability affects the design of the hotel, the way it operates and ultimately the guest experience. A distinction needs to be made between
compliance with the current energy efficiency regulation and implementing a genuine sustainable strategy. The former influences design, the
latter impacts on the operational and experience side.

Much of current regulation, such as Part L of the Building Regulations, is concerned with the hotel design and minimising the energy
consumption, and hence carbon emissions, of the hotel. Green design features include the use of an energy efficient plant, low U value materials,
air-tightness and energy efficient lighting. These measures are being adopted partly because increasing energy efficiency means lower energy
bills.

Implementing a Part L compliant carbon emissions strategy focuses on three steps:

 Minimise the demand for heating/cooling through improved building fabric performance
 Specify the use of efficient systems to meet loads
 Use of low or zero carbon technologies.
In addition to regulatory compliance, there is a growing realisation that adopting green policies in all aspects of the hotel’s operation need not
mean a dilution of brand values or guest experiences. In fact, current evidence shows that this can become a differentiator that can increase
business.

One prime example is One Aldwych, which has incorporated environmental policies without compromising its five-star level of service. The
overriding theme on all its green policies is to minimise resource use. This extends beyond operational efficiency to establishing a green supply
chain for resources used. Some examples include:

 Recycling, not just paper, plastics and glass but also light bulbs and batteries
 Increased water efficiency through the use of vacuum drainage on all toilets
 Locally sourced food
 Use of low toxic paint throughout.
When deciding which green policies and technologies to adopt, the same approach should be taken as to which hotel facilities to provide – that is,
adopting policies that are appropriate to the standard of the hotel.

07 Off-site manufacturing

Hotels have led the way on off-site manufacturing (OSM) because of the use of guestrooms and bathroom pods. Those that specify prefabricated
bathroom pods need to bear in mind the following:
 The robustness of the pod structure to withstand potential damage
 Tolerances for fitting into the structure
 Accessibility of services and ease of replacing ancillary components
 Conformity to British Standards and Code of Practice.
Key issues in pod design development are:

 Materials specification
 Interaction between floor and walls
 Integration of services
 The installation sequence.
The principal benefits of using OSM include improved quality, reduced installation time and a reduced number of trades. The degree of repetition
in the design has a bearing on whether economies of scale can be applied to the cost of the unit. Typically at least 50 identical units are needed
to achieve scale, and discounts don’t kick in before about 200 units are ordered.

The OSM contractor needs to be appointed early. Prefabricated units need to have their design finalised early to allow time for manufacture and
delivery to site.

It is complex and costly to implement design changes once manufacturing has commenced. Risks relating to the manufacturing supply chain
include:

 OSM manufacturers are critical single points of failure. Delay on their behalfs lead to irretrievable loss in the programme
 A lack of detail in the level of specification results in poor quality of finish.
Other forms of prefabricated technologies include modular room units, precast structural members and panellised systems.

08 Hotel cost breakdown

The cost model below is a new-build business hotel located in an urban location in Manchester. The hotel floor area is 8,400m2 and utilises a
proportion of MMC including bathroom pods and pre-cast structural concrete beams, slabs, crosswalls and external wall panels. Amenities
include meeting rooms, bar and restaurants. The costs cover all areas – front of house, back of house and guestrooms.

Rates are at fourth quarter 2006 price levels, based on a lump-sum contract in the North-west. The cost of site preparation, external works and
incoming services are excluded. Also excluded are professional fees, VAT and site abnormals. The rates may be adjusted for specification, site
conditions, procurement route and programme.

Acknowledgments

Thanks to Steve Lacey, partn

Cost model: Renewable energy

2 August 2005
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Tables
 Comparison of the energy savings afforded by various renewable options and how they translate into CO2
In this month’s engineering services cost model, Davis Langdon Mott Green Wall presents a round-up of the principal options
for renewable energy and where they can be best installed

In recognition of the likely causes and effects of global climate change, the UK is committed to meet number of global, European and national
environmental targets. These targets aim to reduce the detrimental effect this country has on the environment through its energy consumption.
One way of meeting these targets is to reduce energy consumption by taking energy efficiency measures, but another, increasingly prominent
strategy is the use of more renewable energy in place of that derived from fossil fuels.

On a global level, the Kyoto protocol was signed by the UK and 140 other nations in 1992. This committed the signatories to reducing their
emission of greenhouse gases, taking 1990 as the base year. However, the UK is also bound by European and UK regulations that operate in
conjunction with Kyoto.

The first phase of the European Union’s emission trading scheme came into effect in January this year and covers the power sector, along with
high-energy users such as oil refineries, metal processing, and the mineral and paper pulp industries. All such companies in the 25 EU member
states must limit their CO2 emissions to allocated levels in line with Kyoto. The principles of the scheme are that participating organisations can:

 meet the targets by reducing their own emissions, or

 exceed the targets and sell or bank their excess emission allowances, or
 fail to meet the targets and buy emission allowances from other participants.
In the UK, the Utilities Act (2000) requires power suppliers to provide some electricity from renewables. This requirement started at 3% in 2003
and will rise to 15% by 2015. In a similar way to EU’s emission trading scheme, generating companies receive and can trade renewables
obligation certificates for the qualifying electricity that they generate. For small renewable generators, renewable energy

guarantee of origin certificates have been introduced, in units of 1 kWh.

The initial focus of the legislation is on CO2, and the goals set by the UK government are:

 20% emission reduction by 2010 (and 10% of UK electricity from renewable sources)
 60% emission reduction by 2050
 Real progress towards the 60% by 2020 (and 20% of UK electricity from renewable sources).
However, last year, four years after the introduction of the legislation, it was estimated that less than 3% of UK electricity was being generated
from renewable sources. As a result, the government felt a change in policy was required, and the ODPM published Planning Policy Statement
22: Renewable Energy in December to promote renewable energy through regional and local planning authorities.

More than 100 local authorities have already embraced PPS 22 and its companion guide by adopting pro-renewables planning policies and others
are expected to follow. The typical requirement imposed by the local authorities is that 10% of a site’s electricity or heat must be derived from
renewable sources, but at least one authority has already raised the bar to 15%. The London Plan states: “The mayor will and boroughs should
require major developments to show how the development would generate a proportion of the site’s electricity or heat from renewables.”

In order to aid, and ensure, compliance with the EU and UK regulations, there are a number of measures in place. For example, the EU Directive
on the Energy Performance of Buildings requires that energy performance certificates must be prominently placed on all buildings open to the
public and commercial buildings built, sold or let from January 2006. This alerts prospective purchasers and tenants to a building’s energy
performance.

As a result, assessing the carbon emissions associated with the operation of buildings is now an important part of the overall early design process
for planning approval.

Methods for doing this have therefore been incorporated into:

 Part L of the UK Building Regulations: (conservation of fuel and power)

 BREEAM (BRE’s Environmental Assessment Method)
 Standard Assessment Procedure for energy rating.
On-site renewable energy sources are taken into account, but developers are not allowed to rely on green tariffs as part of an assessment.

With such requirements pushing the use of renewable energy it is important to be aware of the options available – and where these can most
appropriately be used.

Wind generators

In a suitable location, wind energy can be an effective source of renewable power generation. Even without grant aid, an installed cost range of
£2500 to £5000 per kW of generator capacity has been established over the past few years. The most common arrangement is a machine with
three blades on a horizontal axis, all mounted on a tower or, increasingly for small generators in inner-city areas, on top of a building. Average site
wind speeds of 4 m/s can produce useful amounts of energy from a small generator up to about 3 kW, but larger generators require at least 7
m/s. A small increase in average site wind speed will produce a large increase in the output power. There is a need for inverters, synchronising
equipment and metering for a grid connection.
Third party provision through an energy service company can be successful for larger installations located with or close to the host building,
especially in industrial settings where there may be fewer aesthetic or noise issues than in inner city or residential areas. The energy service
company provides funding, installs and operates the plant, and the client signs up for the renewable electrical energy at a fixed price for a period
of time.

Building-integrated photovoltaics

Photovoltaic materials, commonly known as solar cells, generate direct current electrical power when exposed to light. Solar cells are constructed
from semiconducting materials that absorb solar radiation; electrons are displaced within the material, thus starting a flow of current through an
external connected circuit. Conversion efficiency of solar energy to electrical power is improving with advances in technology and ranges from 7%
to 18% under laboratory conditions. In practice, however, allowing for typical UK weather conditions, an installation of at least 7 m2 of the latest
high-efficiency hybrid modules is needed to produce 1000 watts peak (1 kWp), yielding perhaps 800 kWh in a year. Installed costs range from
£300 to £450 per m2 for roof covering, and from £850 to £1300 per m2 for laminated glass.

Ground source heat pumps

The ground temperature remains fairly constant throughout the year and heat can be extracted by circulating a fluid (normally water) through a
system of pipes and into a heat exchanger. An electrically driven heat pump is then used to raise the fluid temperature through the compression
cycle, and hot water is delivered to the building load as if from a normal boiler, albeit at a lower temperature.

Most ground heat systems consist of a cluster of pipes inserted into vertical holes typically 50 to 100 m deep depending on space and ground
type. Costs for the drilling operation vary according to location, site access and ground conditions. A geological investigation may be needed
minimise the risk of failure and to improve cost certainty.

Such systems can achieve a coefficient of performance (heat output to electrical energy input) of between three and four, achieving good savings
of energy compared with conventional fossil fuels. Installed costs are in the region of £800 to £1200/kW depending on system size and
complexity.

Borehole cooling

The constant ground temperature is well below ambient air temperature during the summer, so coolth can be extracted and used to replace or,
more likely commercially, to supplement conventional building cooling systems. Such borehole systems may be either open – discharging ground
water to river or sewer after passing it through a heat exchanger – or closed – circulating a fluid,often water, through a heat exchanger and
vertical pipes extending below the water table.

Ground source heating and cooling systems are only partial renewable energy, however, because they rely on electrical power, mainly for
pumping. But considerable carbon savings can be justifiably claimed by avoiding the use of fossil fuel for heating and electrical power to drive
conventional chillers. Indicative system costs are from £200 to £250/kW.

Solar water heating

Simple flat-plate water-based collector panels have been used successfully on south-facing roofs over many years in the UK – especially by DIY
enthusiasts prepared to devise their own simple control systems. The basic principle is to collect heat from the sun and circulate it to pre-heat
space heating or domestic hot water, in either a separate tank or a twin coil hot water cylinder. Purpose-designed, evacuated tube collectors have
been developed to increase performance and a typical 4 m2 installed residential system has a costs £2500 to £4000 depending on pipe runs and
complexity. Such systems produce a saving of about 2000 kWh in energy use a year. Commercial systems are larger and slightly more complex
but achieve similar performance: these could be used in low-density residential, retail and leisure schemes with washrooms and showers as they
have adequate demand for hot water.

Biomass boilers

Wood chips or pellets derived from waste, farmed coppices or forests are available commercially and are considered carbon neutral, having
absorbed carbon dioxide during growth. With a suitable fuel storage hopper and automatic screw drive and controls, biomass boilers can replace
conventional boilers with little technical or aesthetic impact. They do, however, depend on a viable source of fuel, and there is a requirement for
ash removal/disposal as well as periodic de-coking. In individual dwellings, space may be a problem because a biomass boiler does not integrate
readily into a typical modern kitchen.

Biomass boilers are available in a wide range of domestic and commercial sizes. For a large installation, they are more likely to form part of a
modular system rather than displacing conventional boilers entirely. There is a cost premium for the biomass storage and feed system, and the
cost of the fuel is currently comparable with other solid fuels. As an addition to a conventional system, installed costs could range from £200 to
£250/kW.

Biomass CHP

Conventional combined heat and power installations consist of either an internal combustion engine or a gas turbine driving an alternator, with
maximum recovery of heat, particularly from the exhaust system. For best efficiency, there needs to be a convenient and constant requirement for
the output heat energy, and the generated electricity should also be used locally, with any excess exported to the national grid.

Unless a source of fuel is available from landfill gas, or from a local biomass digester, then an on-site biomass to gas conversion plant is needed
to fuel the CHP engine. Considering the cost implications for biomass storage and handling as described for boilers, it appears that biomass CHP
will only be viable in specific circumstances, with installed system costs in the order of £2500 to £3000/kW (electrical).

Costings
It can be difficult to compare the potential energy savings of renewable options on a particular project – and how that translates into CO2. The
table above provides some idea, showing the potential saving per £100,000 of renewable investment (£100,000 is the notional “extra over” cost of
introducing renewable energy). And it is worth getting clued up as renewable energy is definitely here to stay.

Source:
Building Sustainable Design