Leisure + Culture

Hotel Build Cost Guide

Maximising Value

Contents
01 Introduction

04

02 Design

08

Design Guidelines

12

Area Schedule

26

03 Cost

32

Cost Drivers

36

Cost Planning

46

Cost Models

52

04 Procurement

66

05 Summary

76

06 Contact Details

Back Cover

Introduction
At AECOM we offer a range
of services that meet the
development and asset
management needs of
hotel owners, operators and
developers from initial feasibility
through to planning, design,
construction and operation.
Before there is a design, there is
an idea for a hotel. Assessing the
feasibility of a hotel development
requires you to understand what
the market opportunity, needs
of the market and cost of the
development are.

4: INTRODUCTION

This guide explains

the relationship
between the
design and the
costs of hotel
development and
demonstrates
the benefits of
obtaining cost
advice throughout
each stage of
the development
lifecycle.

Based on outline information

about the type and size of hotel
product and the amenities that
the market requires, the cost
consultant is able to provide an
initial cost estimate to inform
the development appraisal.
During the design phase,
understanding the way in which
the design of a hotel can influence
the cost can help ensure that the
correct choices are made at the
earliest stages of a project and
will avoid expensive re-design and
cost in use.

Once the design is complete

the next step is to procure a
contractor to undertake the
construction of the hotel. This
requires an understanding of
the various procurement options
available to achieve the right
balance between price and risk.
This guide does not provide all
of the answers but it will provide
the reader with an understanding
of the important relationship
between the design and the
cost of a hotel and the benefits
of obtaining cost advice at each
stage of the development process.

By providing an analysis of cost

by area and function, the cost
consultants advice will ensure
that costs are being allocated
to those parts of the hotel that
will deliver the best return on
investment over the lifecycle
of the asset.

INTRODUCTION :7

DESIGN

Understanding the way in

which the design of
a hotel influences
the cost means that
the correct choices are
made at the earliest
stages of a project
and avoids expensive
re-design and cost in use.

Design guidelines
Food and beverage outlets
Food and beverage outlets and
restaurant requirements vary by
location and hotel type. However,
a good rule of thumb is to provide
restaurant seats ranging from
0.75 to 1.2 times the number of
guestrooms. This does not take
into account specific requirements
for conferences, functions or
banqueting, for which additional
provision will need to be made in,
or adjacent to, the function suites.

12: DESIGN

Most luxury hotels will have at

least two restaurants but some
hotels operating at the upper levels
of the market can offer up to four or
five different types of restaurants.
Generally, there will be a main allday dining area that serves as the
main breakfast area in the morning
and can be converted into lunch
and dinner venues with different
settings. The restaurant dining
area is calculated on the basis of
an area-per-seat allowance. This
allowance varies between about
1.5 to 2.5m per seat, depending
on the style and mode of operation
of the venue. Further allowances
should be made for the service
stations and circulation space
within restaurants.

Lounges and bars

Meeting and function rooms

A hotel is also likely to have a

number of lounges and bars. The
seating capacity allowance for
these ranges from 0.5 to 0.9 times
the number of hotel guestrooms.
The area calculation is made on an
area-per-seat basis.

Ballroom / banquet hall

While many major hotel chains
have their own design and area
guidelines for the capacities
of a ballroom / banquet hall, a
minimum size would be in the
region of 750m. The general
allowance for calculation of the
net area of the ballroom / banquet
hall is in the region of 1.20m per
seat. The minimum total number of
seats is the equivalent of 1.5 to 2.0
times the number of guestrooms.

Kitchens, storage and support

areas are excluded from these
area calculations. Kitchens are
calculated as food preparation
areas and form part of the back
of house and support areas.

DESIGN :15

Junior ballroom
and function rooms

Pre-function areas /
break-out space

In addition to a main ballroom /

banquet hall, the hotel may have
a junior ballroom and smaller
function rooms. A junior ballroom
typically has a seating capacity
of 400 to 500 people.

These should be approximately

33% of the area of the ballroom,
banquet hall, junior ballroom,
function and meeting rooms.

Function rooms that double up as

meeting rooms should be a series
of rooms catering for groups of
20 to 50 people. There should be at
least three of this type of function
room. In addition, there may be
a provision for a boardroom with
a size of around 50m. The total
capacity of the function / meeting
rooms should be in the proportion
of approximately 0.5 times the
number of hotel rooms.
Essential for all function suites
is the concept of flexible meeting
spaces, allowing for changes
in shape, and size by means
of acoustic, sliding / folding
partitions. Each potential
function area must be able to be
serviced separately.

16: DESIGN

Support areas
All of the above areas exclude
supporting areas such as furniture
stores, restrooms, general storage,
AV control rooms, interpreters
rooms and so on. As a rule of
thumb, these would be allowed on
a square metre per seat basis.

General public areas

The general public area of a hotel
may include:
(a) Business centre, including
A reception / waiting area
A secretarial area
A small conference /
meeting room
Small booths / offices
(b) Health club / fitness centre
Space should be allocated for:
An entry area
Common facilities such as
reception, examining room and
nurses room

(c) Commercial space

These spaces are often let out.
Often there are around four to five
such outlets in the hotel.
(d) Front lobby and front office
This covers the main entrance
lobby, which should be a generous
space. The area allowance is
calculated on the basis of a square
metre per hotel room. Supporting
the main entrance lobby is the
lobby waiting area. An allowance
is made for 20 people on the basis
of 2.3m per person. These areas
generally have higher or doublevolume ceilings and pricing should
take this into account.

A beauty centre
A mens and womens spa
A fitness centre and gymnasium
A spa restaurant / juice bar
Employee facilities such as
lockers, lounge and restroom

DESIGN :17

Back of house, support

and services areas
Provisions should be made for
male and female restrooms, with
the female restroom slightly
larger to allow extra space for a
vanity area. A janitors room is
also required to store cleaning
equipment. A further allocation
is made for a reception desk area
together with a front office. As a
guide, 1.75m length is assumed for
each workstation at the reception
desk. One workstation is required
for every 75 rooms. A width of
1.5m is allowed for working space
behind the counter and a width of
4m is allowed for guest queues in
front of the counter.

These are the non-public areas of

the hotel. There should be minimal
interior designers input for these
areas, except for some of the
offices. The spaces occupied under
this category include:
(a) Administration and
service areas
The administration and
service areas include various
departmental offices, such as:

Front office support containing

the office of the front office
manager and credit manager,
telephone operators room,
cashiers room and counting room.

Safe-deposit box, stationery

storage, general office and pantry.

18: DESIGN

Executive offices containing

the offices of the general
manager, resident manager,
food and beverage manager,
assistant food and beverage
manager, general office areas,
executive boardroom
and storage.

Sales offices containing the

office of the sales director,
sales manager, market analyst,
sales executives, group sales
co-ordinator, public relations
manager, reservations manager,
general office, conference room
and storage.

Catering / banquet offices

containing the offices of the
catering manager, banquet
representatives, convention
services and secretarial area.

Accounting offices containing

the offices of the financial
controller, assistant financial
controller, accounting work
area, payroll manager, general
office and storage and mens
and womens restrooms.

DESIGN :21

(b) Food preparation, support

and service areas
Food preparation and service areas
include support spaces for various
departments, such as:

Food preparation, main and

support kitchens containing
production kitchens supporting
the banquet hall and function
rooms, kitchens for the various
restaurants, bakery / pastry
shop and offices for the
executive chef and room
service manager. Area
calculations are generally
made on the basis of area per
seat. Alternatively, as a general
guide, an area equivalent to 40%
of restaurant net areas would
make up the kitchen areas.

22: DESIGN

Storage areas containing

storage for dry food, refrigerated
food (cold rooms), beverages,
refrigerated beverages,
ballroom liquor, the service bar,
silverware, chinaware,
glassware, utensils and
stewards and janitors rooms.
Area calculations are generally
made on the basis of an
area per seat for food storage
supporting the kitchens, and
area per key for general storage.
Generally, storage areas will be
in the region of 30 to 50% of net
total food preparation areas.

Service entrance areas

containing areas for the loading
dock and truck parking bays,
receiving areas, receiving office,
office for the purchasing
manager, purchasing
department, security /
timekeeper, flower shop
storage, trash holding area, wet
garbage refrigeration area, can
wash, garbage compactor,
empty bottle storage,
refrigerated storage for
food, employee entrance area,
compressor rooms and the like.

Housekeeping areas
containing offices of the
executive and assistant
housekeeper, housekeeping
clerks, seamstress, fitting
rooms and storage for linen,
supplies, lost and found, uniform
and uniform-issue rooms.

Laundry areas containing the

laundry and valet office, laundry
room, soiled linen sorting
area, guest laundry area, valet
service room, supplies storage
and compressor room.

DESIGN :23

Area calculations for

housekeeping and laundry
areas are generally made on
the basis of area per key of
the hotel. Requirements for
laundry facilities will vary
between locations and between
operators. In many instances,
the laundering of bedsheets
and towels is outsourced. If so,
the requirements for in-house
laundries are limited to a small
number of domestic machines.

Engineering areas containing

offices of the engineering
director, assistant engineer,
general maintenance and
secretary, paint shop, carpentry
shop, upholstery shop, plumbing /
refrigeration shop, electrical
shop, key shop, TV repair shop,
parts storage, energy
management computer room
and janitors store.

24: DESIGN

Mechanical areas usually cover

two major locations, one of
which is normally in the
basement, the other on the
upper level or roof space of
the hotel.

Mechanical areas in the

basement contain the
engineers control room,
engineers office, toilet and
locker, janitor room, boiler
rooms, fire control pump rooms,
electrical sub-stations,
electrical rooms and wet riser
tanks.

Mechanical areas in the

upper levels can contain the
air handling units, domestic
water tanks, sprinkler tanks,
wet riser tanks, condenser
water storage tanks, electrical,
switch and power rooms,
although these may also be
housed at the basement level if
space allows.

(c) Employee facilities

Employee facilities areas include
spaces for:

Human resources office

containing rooms for the
personnel manager, assistant
personnel manager,
interviewing, training manager,
training, first aid application
and storage.

Employee areas containing

staff lockers and shower areas,
toilets, dining and recreation
areas. If not provided in the
feasibility study or the business
plan, the number of employees
can be calculated on the
basis of employees per key. For
five-star hotels, the range can
be from 1 to 1.5 employees per
key. The changing and locker
areas are generally based on
area per employee.

DESIGN :25

Area schedule
Using functional area data
from previous projects and from
operators standard requirements,
it is possible to create a reasonably
accurate assessment of the space
requirements for a hotel.
This can form the basis of
preliminary budget calculations
for a hotel of a particular standard
with a stated number of rooms and
ancillary functions (restaurants,
fitness, spa, banqueting and so on)
in advance of the development of
any design.
The hotel area schedule must,
therefore, be based on realistic
numbers. Any gross over or under
allowance of areas would cause a
distortion of the forecast cost.

26: DESIGN

The area allowances must of

course be tested against other
hotels of similar standard in the
geographical region, to check
that it is competitive. Ideally, the
market feasibility study provides a
suggested high level area program
based on market requirements.
A preliminary budget costing
for a hotel development can
be generated quite quickly and
efficiently, based on data for
similar existing hotels, design
criteria of major hotels and
knowledge of the market. This
includes setting the number of
hotel room bays and keys and
the total seating capacities
for food and beverage outlets,
entertainment lounges, banquet,
ballroom and meeting facilities. It
should also cover the capacity of
the health club facilities and the
size and number of retail outlets.

Worked example based on a luxury hotel

Bays

Keys Total bays

A. Standard guest rooms

1. King rooms

200

200

2. Queen rooms

100

100

3. Accessible rooms

20

20

55

55

B. Suites
1. Junior suites

40

80

2. Executive suites

10

30

4. Presidential suites

10

5. Club lounge

(circa 5% of total room count)

4. Other standard rooms

(eg twin)

Total 427 500

Based on the above configuration, the total number of bedroom bays is
500 and the total number of keys is 427 about 85% of the total number
of bays.

Typical total area allowances

for luxury hotels vary around
the world, from circa 80m to
over 120m of gross floor area
(excluding parking and external
areas) per bay. Hotels in more
Western locations tend to have
smaller bedrooms than those
in the Middle East or Asia. A
500-bay five-star hotel could
therefore be expected to have
a range of gross floor area of
between 40,000 to 60,000m.

DESIGN :29

The breakdown between the

bedroom zone, public areas and
back of house for a notional 500bay, 50,000m hotel would be:

A. Guestrooms and suites

22,500 to 30,000m

55 - 60%

B. Public area

10,000 to 15,000m

20 - 30%

7,500 to 12,500m

15 - 25%

C. Back-of-house
administrative, support
and services areas

Hotel total gross area 40,000 - 57,000m

Based on the above hotel floor

areas, the gross area per bay
ranges between 80 to 115m.

100%

The net areas of the bedrooms

(including bathrooms) varies
according to geographical location,
from a low of about 35m up to
about 55m but typically between
40 and 50m net bedroom area is
a good guide

COST

By providing an analysis
of cost by area and
function, the cost
consultant is able to
ensure that costs are
allocated to those parts
of the hotel that deliver
the best return on
investment over the
lifecycle of the asset.

Cost drivers
The major cost drivers of a hotel
development include:

h. The level of provision and

facilities of rooms

a. Site location, shape, conditions,

means of access and visibility

i.

The storey height if

exceptionally high, it will
need a heavier structure,
more complex foundations,
additional lifts and firefighting installations

j.

Location of function rooms.

One major impact on the cost
of the structure is the location
of the main function room or
ballroom. The ballroom should
not be located directly below
the hotel guestrooms tower,
as it requires column-free
space that is difficult and
expensive to accommodate and
is likely to require the
introduction of transfer
structures at the base of the
guestroom tower

b. Position of the hotel in

the development
c. The shape and form of the
building
d. The external facades,
particularly the extent of
glazing and cladding
e. The level of sophistication
of building services and fire protection systems
f. Particular requirements of the
chosen hotel operator
g. Shape and layout of the
guestrooms zone, particularly if
this is a tower

36: COST

The choice of guest

room configuration
can affect area
efficiency by as
much as 20%
of the gross
floor area.

38: COST

Another area for careful

consideration is the location of
the bank of guest and service
lifts rising up to the guestrooms.
These should be located centrally
to the guestroom block and the
guest lifts should descend into the
entrance lobby, where pedestrian
traffic can be monitored by the
front desk.
A third major consideration is the
configuration of the guestroom
block, particularly if this is in
the form of a tower. Analysis
shows that some shapes and
configurations of a guestroom
tower yield more cost-effective
solutions than others. In fact, the
choice of configuration can affect
the area efficiency by as much as
20% of the gross floor area.

Ideally, the efficiency of the

guestroom zone should be in
the region of 75%for a tightly
designed, double-loaded
corridor layout. However, for a
single- loaded corridor or atrium
layout, the efficiency can drop
as low as 60%. Obviously, the
higher the efficiency, the more
economical the construction cost.
It is critical to ensure the design
is economical without sacrificing
the design intent. Due to the
multiplier effect of having many
floors in the guestroom zone,
minor differences or inefficiencies
can have a major impact on the
construction cost.

The following factors must be

considered:
a. Number of guestrooms
per floor
b. Lift location and escape
staircase cores
c. Shape of guestroom tower, as it
affects the wall-to-floor ratios
d. Corridor configuration

COST :39

A limiting factor of the number of

guestrooms per floor is the local
authority building code requirement
for fire evacuation, which is
controlled by the distance between
fire-escape stairs. In a tower, an
optimum number of guestrooms
would be in the region of 16 to 24
rooms per floor if only two fireescape stairs are envisaged.
This ratio also facilitates efficient
housekeeping. Increases in the
number of rooms per floor can
trigger the need for additional
fire-escape stairs and additional
lifts. This in turn may require the
lift core to be increased in size,
with its corresponding increase
in gross floor and elevation
areas leading to an increase in
construction costs.

40: COST

A guestroom tower may take

various plan shapes, ranging from
rectangular to circular, triangular,
curved or offset. It has been
proven that the most efficient
shape is generally rectangular,
with a double loaded corridor
configuration.
Curved and circular shaped
towers will involve higher costs
because of non-standard room
bays and panelled or faceted
glazing. Architects may opt for an
approach to maximise views from
the guestrooms to accommodate
the often narrow site, but there is
a cost premium to this and this
choice should be scrutinised.

Typical guestroom layout

Guestroom sizes are generally

standardised. For a five-star hotel
it would be rectangular in shape,
in the region of 40 to 50m net
area inclusive of sleeping area and
bathroom. Some developers or
designers may attempt to provide
larger and odd-shaped rooms
which may not be economical.
Good workable dimensions are
approximately 4.5m by 9.1m. The
width should not be excessive,
as it increases the length of the
corridors, the cost of the structure
and affects the external walls of
the bedroom zone.

Examples of different
configurations are shown below.

The single-loaded corridor configuration is

less efficient as the corridor serves only one
set of guestrooms. Efficiency is in the region of
65% or less.

The double-loaded corridor configuration

is efficient, with one single corridor serving
guestrooms on both sides. Efficiency is in the
region of 70 to 75%.

42: COST

The offset configuration is the most efficient

configuration in terms of accommodating

The rectangular configuration is not efficient,

more rooms per floor, with minimum effect on

as it requires additional corridor lengths to

external walls and finishes. Efficiency is in the

serve end rooms. Efficiency is in the region of

region of 75%

65% or less.

COST :43

The triangular configuration provides

inefficient space for the central core. The
corner rooms are odd-shaped. Efficiency is
likely to be below 65%.

The atrium configuration is served by singleloaded corridors, which reduce efficiency.

Though it may provide an opportunity for
glass elevators, there is a cost premium.
Smoke extraction and an extra premium for
roof construction is a major consideration.
Efficiency is likely to be around 60%.

44: COST

The circular configuration may have shorter

corridors but it is a challenge to design
efficient room space, especially in relation to
the location of the bathroom. The central core,
where the lifts, housekeeping and fire-escape
stairs are located, will determine the floor area.
It is unlikely to achieve efficiency beyond 70%

COST :45

Cost planning
Cost planning is typically done in
two stages. The first stage involves
an initial order of magnitude
costing or cost appraisal. This
usually takes place before any
designs have been produced,
and is based on available cost
data and past experience of hotel
projects of comparable standard,
together with an understanding of
the current market trends.
The second stage involves
more detailed cost planning
based on design information
procured specifically for the
particular project.

46: COST

Initial order of
magnitude costing
Using benchmarked area
data, a preliminary schedule
of all functional areas in
the hotel is made based on
outline information about the
hotels market position, the
recommended type of hotel
product, and the amenities the
market requires. This produces a
reasonably accurate estimate of
overall gross constructed area.
Based on this preliminary
area schedule, the estimated
construction cost for the hotel
is calculated. This is usually
done both on a cost per square
metre basis and on the basis
of a cost per bedroom or key,
using historical benchmark data
collated from similar projects.
Assuming that both calculations
produce answers in the same
ballpark, it is likely the hotel
design is reasonably efficient.

Our cost consultants are wary of

hotels with, for example, unusually
large or extensive restaurants,
conference facilities, health clubs,
suites or other unusual facilities
that skew the comparative
calculation by increasing the
cost per key without perhaps
significantly affecting the cost per
square metre.
For any such unusual hotels,
further discussion with the
developer is advisable to ensure
that his requirements have been
accurately captured. An initial
cost prepared on a $/m should,
however, be more reliable.

COST :47

With the preliminary costings in

place, a construction cost cashflow forecast is prepared, based
on the estimated time required to
carry out the design, procure the
right contractor and then build and
fit-out the hotel. The results of this
cash-flow study give an indication
of the likely draw-down of the
funds throughout the construction
of the hotel to allow developers
and investors to assess the need
for, and cost of, funding.
The construction cost consultant
then works with the developer
and the design team to review
and modify the scope and nature
of the hotel design, and the
corresponding construction cost.

48: COST

This review process may be

repeated a number of times
until the developer arrives at
a financially viable scheme
that yields the required target
profitability. In this way, a budget
is refined and set for construction
of the hotel and the developer
is given the confidence in his
viability calculations to give the
go-ahead to proceed to the next
stage of the project.

Detailed cost planning

The developers design team
should design the hotel to
provide the functional areas
necessary to meet the hotel
operators requirements within
the constraints of the approved
budget. The construction cost
consultant costs the design and
prepares an initial cost plan that
breaks down the cost of each
element of the building into
smaller, more identifiable and
manageable items.
The cost plan is fine-tuned to try
to make sure that firstly, overall
costs fall within the targeted
budget and secondly, that the
spread of the expenditure is about
right ie the money is being
spent on those elements which
are customer facing or affect the
operating costs of the building
and therefore improve the
potential viability of the scheme.

This may involve a valueengineering (VE) process, carried

out with the construction cost
consultant guiding the designers
by using analyses and benchmark
comparisons with other hotel
projects. All cost elements are
scrutinised for efficiency in design
and whether they add value to
the hotel. Our construction cost
consultants, who are well-versed
with the various cost drivers of a
hotel development, share their
knowledge and experience with
the design team, challenging
and being challenged, thereby
maximising the value and
effectiveness of the hotel building.

COST :49

The construction cost consultant

may suggest alternative
construction methods and
advise on the range of products
and materials available in the
market that are within the
allowable budget, from which the
architects and interior designers
can then select.
Once the preliminary designs
are completed and have been
checked to remain within budget,
the construction cost consultant
compiles all the information into
a final detailed cost plan that
is distributed to the developer
and consultants. This defines
the design intent and the agreed
budget to which the developer and
design team should adhere.

50: COST

The initial budgeting process

minimizes time spent pursuing
design options that are either not
affordable or do not produce the
required financial return.

Construction
cost consultants
share their
knowledge and
experience with
the design team,
challenging and
being challenged,
thereby maximising
the value and
effectiveness of
the hotel building.

COST :51

Cost models*
Europe

Spain

TOTAL USD

Structure and envelope

Internal fit-out
Building services
On-cost
FF&E
External works
Total

6,072,299
1,667,432
11,027,489
7,062,250
5,819,339
263,350
31,912,160

* Cost models based on a mid-market product

52: COST

USD/m2 (GBA) USD/key

8,544 m2

711
195
1,291
827
681
31
3,735

153 keys

39,688 19%
10,898
5%
72,075 35%
46,158 22%
38,035 18%
1,721
1%
208,576 100%

Russia

TOTAL USD

USD/m2 (GBA) USD/key

8,544 m2

6,493,440

358,848

5,510,880

3,740,300

5,615,579

854,400
22,573,447

760
42
645
438
657
100
2,642

153 keys

42,441 29%
2,345
2%
36,019 24%
24,446 17%
36,703 25%
5,584
4%
147,539 100%

COST :53

United Kingdom

TOTAL USD

Structure and envelope

Internal fit-out
Building services
On-cost
FF&E
External works
Total

7,800,037
3,785,507
7,543,701
5,197,200
5,819,339
263,350
30,409,134

USD/m2 (GBA) USD/key

8,544 m2

913
443
883
608
681
31
3,559

153 keys

50,981 26%
24,742 12%
49,305 25%
33,969 17%
38,035 19%
1,721
1%
198,753 100%

Cost models*
Middle East

Dubai

TOTAL USD

Structure and envelope

Internal fit-out
Building services
On-cost
FF&E
External works
Total

USD/m2 (GBA) USD/key

8,544 m2

5,885,147
3,022,309
6,289,284
4,250,100
5,356,243
351,767
25,154,850

* Cost models based on a UK mid-market product.

The equivalent product in the Middle East is a budget product
56: COST

689
354
736
497
627
41
2,944

153 keys

38,465 23%
19,754 12%
41,106 25%
27,778 17%
35,008 21%
2,299
1%
164,411 100%

Qatar

TOTAL USD

8,116,800
3,844,800
8,116,800
3,844,800
9,825,600
427,200
34,176,000

USD/m2 (GBA) USD/key

8,544 m2

950
450
950
450
1,150
50
4,000

153 keys

53,051 24%
25,129 11%
53,051 24%
25,129 11%
64,220 29%
2,792
1%
223,373 100%

COST :57

Saudi Arabia

TOTAL USD

Structure and envelope

Internal fit-out
Building services
On-cost
FF&E
External works
Total

58: COST

5,002,375
2,568,963
5,345,891
3,612,585
4,552,807
299,002
21,381,623

USD/m2 (GBA) USD/key

8,544 m2

585
301
626
423
533
35
2,503

153 keys

32,695 23%
16,791 12%
34,940 25%
23,612 17%
29,757 21%
1,954
1%
139,749 100%

Cost models*
Africa

South Africa

TOTAL USD

Structure and envelope

Internal fit-out
Building services
On-cost
FF&E
External works
Total

3,875,822
1,380,676
5,598,122
2,808,660
2,136,503
146,327
15,946,110

* Cost models based on a mid-market product

60: COST

USD/m2 (GBA) USD/key

8,544 m2

454
162
655
329
250
17
1,866

153 keys

25,332 24%
9,024
9%
36,589 35%
18,357 18%
13,964 13%
956
1%
104,223 100%

Nigeria

TOTAL USD

6,965,981
2,496,952
10,076,620
5,055,780
3,845,742
263,389
28,704,464

USD/m2 (GBA) USD/key

8,544 m2

815
292
1,179
592
450
31
3,360

153 keys

45,529 24%
16,320
9%
65,860 35%
33,044 18%
25,136 13%
1,721
1%
187,611 100%

COST :61

Nairobi

TOTAL USD

Structure and envelope

Internal fit-out
Building services
On-cost
FF&E
External works
Total

62: COST

3,978,504
1,243,969
5,080,700
2,821,440
3,281,781
160,960
16,567,354

USD/m2 (GBA) USD/key

8,544 m2

466
146
595
330
384
19
1,939

153 keys

26,003 24%
8,131
8%
33,207 31%
18,441 17%
21,450 20%
1,052
1%
108,283 100%

Cost per key analysis

Based on a mid-market hotel

250,000
FF&E
Excluding FF&E
200,000

150,000

100,000

50,000

Nairobi

Nigeria

South Africa

Saudi Arabia

Qatar

Dubai

Russia

Spain

UK

Cost/m2 analysis
Based on a mid-market hotel

FF&E
Excluding FF&E
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500

Nairobi

Nigeria

South Africa

Saudi Arabia

Qatar

Dubai

Russia

Spain

UK

PROCUR

REMENT

Selecting a contractor
to undertake the
construction of the
hotel requires an
understanding of the
procurement options
available to ensure
that the right balance
between price and risk
is achieved.

Procurement
Having completed the cost
planning process, agreed a
budget and scope of work and
received the go-ahead from
the developer to proceed to the
next stage, the construction
cost consultant advises on the
most appropriate procurement
approach for the particular blend
of time, cost and quality that
relates to the hotel project.
Every project is different,
and it is important that the
choice of the most appropriate
procurement route and the
selection and pre-qualification
of potential contractors for the
project is carefully considered.
Even the best cost plans will be
undermined if the wrong choice of
contract or contractor is made or
if the design information on which
the contract is let is incomplete or
of poor quality.

70: PROCUREMENT

The three most commonly

encountered forms of
procurement for hotels are briefly
described below:

Traditional lump sum

Traditional lump-sum contracts,
based on full bills of quantities or
priced schedules of work, provide
an essential means of letting
and cost managing the work as
it proceeds. However, they do
require all design to be finalised
and detailed, and complete
documentation to be prepared
before going to tender, which
takes time and the overall life of a
project is therefore usually longer
using this route. Careful planning
and interfacing of, for example,
the interior design with the main
building works can reduce the
impact on the master programme.

72: PROCUREMENT

The main advantage of completing

the design before construction
commences is the fact that the
contract cost is established in
advance of entering into the
contract and work starting on site.
The cost risk to the developer is
therefore relatively low. Control of
design and quality remains largely
in the hands of the developer and
the design team.
If properly set up and
administered, this can be a good
form of contracting to produce a
high-quality hotel.

Design and build

The design and build (d+b) approach
needs a clearly stated set of
requirements, setting out in detail
those parts of the finished hotel
that are important to the developer
or hotel operator (for example,
the finishes to the public areas or
the performance of the services
installations, but not necessarily the
detail of how the main structure is
put together) but without producing
full design documentation.

The contract price is based on

the contractor satisfying these
requirements while leaving a
significant part of the design,
particularly the detailed design
development, to the contractor.
The perceived lack of control by
the developer over quality issues
may lead to compromises by
the builder despite the design
team often being novated to
the contractor. This is a good
and usually cost-efficient form
of contracting for reasonably
standard, repetitive types of
hotel such as budget lodges and
branded mid-market hotels. It is
less often used for luxury, fivestar hotels.

PROCUREMENT :73

Construction management
The construction management
(CM) approach, where the work
is let under a series of smaller
individual trade contracts under
the management of a specialist
construction management
company, can provide programme
advantages but may expose the
developer to greater cost risks.
This is because the out-turn cost
(end cost) is not known until the
last trade package is agreed.
This construction management
approach also does not
provide the developer with a
single point of responsibility
for the construction works,
which developers might see
as a disadvantage. It requires a
much greater involvement by
the developer, in dealing with
individual trade contracts and
package contractors.

74: PROCUREMENT

This approach is often used on

large or complex hotel projects
where making a quick start on
site, before the whole design
is completed, is important in
order to minimise the overall
duration of construction. Careful
consideration of all factors is
needed before proceeding down
this procurement route.
A modified version of this
method can be used where,
part way through the design
and procurement process, the
contractor warrants the cost by
providing a guaranteed maximum
price (GMP), usually including
a premium cost to reflect the
additional risk he is taking on.
Any savings achieved within the
GMP are shared between the
developer and the contractor
in a predetermined proportion,
thereby creating an equitable risksharing arrangement.

Procurement management
The cost consultant will be actively
involved in establishing detailed
procurement strategy to cope with
the clients master programme.
If some packages of work need
to be procured at an early stage
to meet the programme, the cost
consultant will actively participate
in the pre-qualification and
selection of suitable contractors,
including sourcing internationally,
if required. AECOMs experience
and global presence allows us to
put together the necessary tender
documentation and recommend
the appointment of appropriate
contractors for these packages in
a timely manner

PROCUREMENT :75

SUMMAR

RY

Summary
This guide explains the
relationship between the
design and the costs of hotel
development and demonstrates
the benefits of obtaining cost
advice throughout each stage of
the development lifecycle.
Successful hotel development
requires not only an
understanding of the market,
but also the ability to design and
procure the right product at the
right price.
To achieve this you need to
understand the relationship
between design and cost and
have knowledge of the latest
technologies, materials, prices
and construction methods.
Combined with the knowledge of
how hotels operate, this ensures
that you have the right balance
between capital expenditure
and operating costs.

78: CONCLUSION

From initial feasibility through

design, procurement and
construction, the role of the
construction cost consultant is key.
We hope that you have found
this guide a useful source of
information and guidance for your
hotel projects. We would welcome
the chance to discuss it with you
in greater detail.
At AECOM we offer a range of
services that meet the development
and asset management needs
of hotel owners, operators and
developers from initial feasibility
through to planning, design,
construction and operation.

About AECOM
AECOM is a global provider of professional technical
and management support services to a broad range of
markets, including hospitality, leisure, culture, facilities,
environmental, energy, transportation, water and
government. With approximately 45,000 employees around
the world, AECOM is a leader in all of the key markets that
it serves. AECOM provides a blend of global reach, local
knowledge, innovation and technical excellence in delivering
solutions that create, enhance and sustain the worlds built,
natural and social environments. A Fortune 500 company,
AECOM serves clients in more than 130 countries.
More information on AECOM and its services can be found
at www.aecom.com.
Kevin Underwood

Philip Churchman

Global Leader, Leisure + Culture

Cost Consultancy, Europe

m: +44 (0) 7768 877382

m: +44 (0) 7795 043872

k.underwood@aecom.com

phil.churchman@aecom.com

Paul Nash

Paul Ralph

Project Management, EMEA

Cost Consultancy, Middle East

m: +44 (0)7876 396338

t: +971 4 439 1000

paul.nash@aecom.com

paul.ralph@aecom.com

Margreet Papamichael

Neels Heunis

Cost Consultancy,
Africa
A total fitness programme
for your
t: +27 11 666 2000
m: +44 (0) 7973 347843
hotels
portfolio
margreet.papamichael@aecom.com neels.heunis@aecom.com
Economics, EMEA