Keeping property improvement plans on track is always essential to save money and time. But particularly at this time, with constant fluctuation in tariffs, it is vital for everyone involved to work together to get PIPs back on track when there are issues.
“Supply chain disruptions, inflation, and tariffs have significantly impacted projects recently,” said Lori A. Horvath, managing director of JLL and Americas practice lead for PDS Hotels & Hospitality. “We mitigate these risks by understanding material sourcing, solving problems proactively, and promoting cross-team collaboration.”
Mary Beth Cutshall, chief growth officer for Vision Hospitality Group, agreed that tariffs, supply chain issues and inflation have driven up hotel construction costs, causing delays and squeezed margins. Additionally, labor shortages and expensive materials are forcing some developers to scale back or postpone projects.
“Only those projects with solid projected performance fundamentals will go forward until more certainty is evident,” Cutshall cautioned.
To get the current projects back on track, constant and clear communication is key, along with an increased focus on contingency plan timelines, consultants and experts told Hotel Management.
Keeping the PIP on Track from the Start
Working with the right team and project manager, specifically, can make or break how work proceeds when challenges and delays arise.
“While projects inevitably face unforeseen conditions, we've found that having a team that can provide solutions quickly minimizes impacts and gets projects back on course,” Horvath said.
Similarly, LW Hospitality Advisors’ asset management group, which specializes in costing, execution, planning and management of PIPs, gathers a skilled team before the project begins to ensure success. “A critical path has to be developed with a timeline and a budget, to ensure each phase goes down in a timely, cost-efficient and effective manner,” said President and CEO Daniel Lesser.
Define the objectives, the budget, the deliverables, and the milestones before any project begins, Cutshall advised.
“Establishing a clear scope and budget early on, making sure they are clear before the project begins and ensuring the entire team from architects and contractors is aligned with these expectations is critical,” she said.
Negotiating with Brands and Establishing Realistic Timelines
Prior to the start of the project, VHG suggests extensive pre-construction planning that includes an operational impact analysis and an ongoing feasibility review, in order to execute the PIP at a time when it has less impact on guests and the property.
"We don’t want to displace revenue…and impact the guest experience,” Cutshall said. “Especially in seasonal markets, it’s really important that the ops team and the management team are really involved in the pre-planning [to decide] when it will have the least amount of impact.”
Likewise, JLL’s team identifies low occupancy periods and creates realistic timelines with built-in contingencies. “In our experience, careful upfront planning, thorough due diligence, and thoughtful design create tenfold returns during implementation by minimizing surprises and ensuring smoother execution across all aspects of the PIP process,” Horvath said.
VHG and other groups also plan materials ordering far in advance to avoid shortages and delays. “Every day, the news is changing about tariffs and where to get goods…By involving procurement and logistics early on, the material is bought ahead of time…and there is no lag with that,” Cutshall said.
When choosing a firm to manage or consult on PIPs, it is important to work with a skilled project manager, according to Cutshall and Lesser. “At the end of the day, the project manager is the one who executes the project and will be able to right the PIP if it goes off track,” Lesser said.
“The project manager is the quarterback. They have to be solving problems and be creative…they have to be very disciplined about keeping everybody on track, but also be flexible because things come up,” Cutshall said. And, when problems arise, the project manager needs to communicate that with team members.
Establish Contingency Timelines and Be Open to Negotiation
Is it essential — particularly with the current tariff uncertainty — to build out contingency timelines, which allow for flexibility when setbacks occur, Cutshall said.
For example, in pre-development of a recent dual-brand project, VHG leaders met with critical team members and increased the general contingency, along with the budget and timeline contingency, and added a tariff sub-contingency in case the current proposed tariffs went through. “We decided because everything is so topsy-turvy and unpredictable these days, it would be better to be more conservative and take up our contingency percentage,” Cutshall said.
Horvath said JLL recommends engaging with brands early regarding variance requests and establish clear budget expectations with all stakeholders, always including cost contingencies.
Communicate, Communicate, Communicate
Recognizing that increased costs and time delays are major concerns, JLL address issues that arise by increasing communication cadence, overcommunicating expectations, and maintaining accountability, Horvath said.
Cuthsall said it is “really critical” to maintain transparent communication throughout the process. VHG has weekly check-ins with the asset manager, the architect, and others, and then documents decision changes formally. And, during the company’s weekly design and construction meeting, the team reviews all of its PIPs and development projects. “We talk about anything that has shifted. It’s that constant cadence that helps us stay better on our timeline,” she noted.
Communicating and negotiating with owners and brands is also essential. “Often, they can provide guidance and can offer some flexibility on deadlines or standards,” Cutshall said.
“One of the biggest mistakes is not negotiating with the brand; everything is negotiable,” Lesser said. Negotiating scheduling time requirements can make the difference between getting a $10 million PIP done in one year or spending $2 million annually over five years.
The delays that resulted during the height of the Covid-19 pandemic taught brands and PIP management firms to work together as partners to solve problems, and at times deviate from strict brand standard deadlines, Cutshall said. “Some hotel brands enforce strict penalties for delays…it is really working with the brand and helping them understand the challenge, and what can be controlled and what can’t be controlled,” Cutshall said.
While It’s not uncommon for PIPS to go off track, it doesn’t have to turn into a crisis, Cutshall said. “I really think that success lies in proactive planning, strong communication and a disciplined but flexible mindset.” A flexible mindset helps hotel developers adapt by exploring alternative materials, local sourcing, modular construction, and creative financing to manage rising costs and delays, she added.
This article was originally published in the July/August edition of Hotel Management magazine. Subscribe here.