Cost study: Holiday Inn Express

No comments

The client wanted a budget hotel built for a fixed price with minimum risk. Thanks to the innovative use of a special purpose vehicle company, it was able to start operating the new Holiday Inn Express at Wellingborough after just 30 weeks on site

At-a-glance guide

Project
New-build, 78-bedroom budget hotel with breakfast facilities, bar and meeting rooms

Client
Premier Hotels – a Holiday Inn franchise that runs the Holiday Inn Express brand

Location
Wellingborough, Northamptonshire, close to the A14/M1 junction

Cost summary

Construction cost of £2,065,000, including fees, plus £400,000 for furniture, fixtures and equipment
Unit construction cost of £795/m², including fees. This comes to £26 470/guestroom, plus £5128 for furniture, fixtures and equipment
Total cost of £31 598/guestroom compares with a benchmark range of £24 000-30000/ guestroom for budget hotels

Construction completion and building occupation
November 1998

Cost and procurement constraints

Quick 30-week construction and fit-out programme from start on site to operational hotel
Client required maximum risk transfer to contractor

Construction methods
Extensive use of prefabricated components contributed to fast construction

Procurement method

An innovative turnkey project structure was used in which the contractor set up a special purpose vehicle and then let a fixed-price building JCT80 contract
The SPV acquired the site, commissioned the design, built and fitted-out the building. The SPV enabled time and cost risk to be shared between it and the contractor but not the end-user, Premier Hotels
On completion, Premier Hotels bought the SPV

Client’s brief
Premier Hotels’ aim was to provide a high-quality budget hotel as quickly as possible for an agreed cost, with as little risk to itself as possible.
The specification was based on standards used on similar hotels that complied with Holiday Inn Express design criteria, amended to suit site conditions. Premier Hotels specified its standards and design constraints to the contractor through a development agreement in the form of a short performance specification and indicative drawings.

Procurement
The procurement priorities for Premier Hotels were cost certainty and single-point responsibility. It wanted one party to be responsible for buying the land, building the hotel and integrating and co-ordinating all the furniture, fixtures and equipment.
To achieve this, contractor DMD created a special purpose vehicle called Premier (Wellingborough). It was responsible for providing an operational hotel, including all FF&E and ingoings, on a turnkey contract. On completion of the contract, Premier Hotels purchased the company and, with it, the operational hotel.
This unusual project structure differed from guaranteed maximum price design-and-build procurement in that it transferred all the risk from client to contractor. Unlike the more common GMP design-and-build form of risk transfer, where the client still carries a limited degree of risk and has contact with several parties at any one time, Premier Hotels had a single point of contact – the SPV.
However, a potential drawback with this route was the lack of a direct contractual link between Premier Hotels and the contractor. This may have led to problems if disputes had arisen, for example as a result of Premier Hotels requiring variations in the design. Luckily, in this case, the process ran smoothly.
The SPV decided to use a standard JCT80 form of contract so the design could be completed before execution of the contract.
As the design team and contractor had all worked with Premier Hotels before, the cost for the works was negotiated, and, thanks to the ongoing relationships between the project parties, no significant problems arose from using this form of procurement.

Design
The special purpose vehicle and its design consultants developed the brief through to detailed design.
One of the features of Holiday Inn Express Hotels is that each hotel has a “Great Room”, an area that provides continental breakfast facilities and dinners for guests, and has a licensed bar. Such enhanced catering facilities are unusual for budget hotels.
Each bedroom has an internal gross floor area of about 20 m², typical for a budget hotel room. The internal finishes and light fittings in the bedrooms are of a high standard and include telephone and data points.
All the bedroom doors are fitted with a card-entry system, which is also connected to the bedroom lights and the internal heating. The same card can be used to buy drinks and snacks within the hotel.
The public areas also include meeting facilities for up to 20 people.

Prefabricated construction
To construct the hotel as quickly as possible, the contractor used various prefabricated building systems that it had tried on earlier projects for the same client:

The structure was constructed using a proprietary cold-formed steel frame system whereby the external leaf is made of facing brickwork and the internal leaf is constructed of lining panels and steel panels. This enabled the contractor to construct a floor a week once the substructure was completed
Prefabricated bathroom pods ensured that quality was consistent throughout the hotel and enabled fast construction
Stairs were prefabricated from steel for speed and quality
All the internal walls were lightweight stud partitions, which also helped speed up construction.

Cost commentary
At £31 598/guestroom, the overall construction cost and unit cost/guestroom is at the higher end of the budget hotel range. A typical range is £24 000-30 000/guestroom. This slight premium was, in part, caused by the unusual procurement form, the enhanced public areas and the quality of the design.
The quality of the finishes and furniture, fixtures and equipment is of a high standard for a budget hotel. There are also facilities for preparing continental breakfast and dinner, and a licensed bar area within the Great Room, all of which add to the cost.
The elemental costs were, on the whole, in line with the budget hotel sector. However, enhanced catering facilities meant that the electrical and fittings elements were more expensive than usual. Another factor in the services cost was automatic lighting and heating, which were linked to the card-entry swipe system.
The final account figure was identical to the contract sum, because of the fixed-price nature of the development agreement negotiated by Premier Hotels and the special purpose vehicle before the work began. Also, the works were completed in 30 weeks, in line with the target programme. There were no significant defects at practical completion.

Brief specification
Substructure
Pad foundations to support steel frame
Frame
Metsec steel frame with loadbearing internal walls
Upper floors
Composite decking of concrete and Metsec steel
Roof
Pitched timber roof with roof tiles
Stairs
Prefabricated steel staircase with concrete infill
External walls
Outer leaf in facing bricks and inner leaf in steel panels
Windows and external doors
Aluminium side-hung pivot windows, double-glazed with acoustic trickle vents, polyester powder-coated
Internal walls and partitions
Metsec studs and Gyproc stud partitions to achieve a sound separation of 50 dB
Internal doors
Veneered solid-core doors with sound seals and card-entry system
Decoration
Emulsion and wallpaper to the walls. Carpets, with floor tiles around bar and reception areas. Mixture of suspended ceilings and plasterboard ceiling
Services