Big Data & Analytics Transforming Hotel Development Costs

Many hotel industry experts agree that innovation and technology will be the keys to controlling costs of hotel development projects in future. “Total Project Management (TPM) and Building Information Modelling (BIM) software already allows architects, engineers, interior designers, space planners, general contractors work together during the planning and design stages, developing solutions early in the process to avoid costly changes later”. Further partnerships with tech firms should ignite the development of hotel industry specific tools, incorporating all kinds of data like brand requirements, financial, schedule elements, external elements like weather, etc. All this if linked together can become a tremendous instrument for creating great design sustainable hotel projects. In recent years, collaborative design work methods have already been effective in reducing costs, particularly in healthcare facility development, so now it’s time to have the impact on the hospitality. 

Changes, changes, changes…

Hotel projects usually have a long gestation period of at least 6-8 years and as a thumb rule, every 10-15% rise in project cost extends the breakeven time by a year. So how incorporating all the data can improve profitability and protect from unnecessary costs? Well, by hedging the risks of the project delay.  Delays on construction projects are almost always accompanied by cost and time overruns; can cost not only a lot of nerves of project managers, investors but clearly can be pricey and damage the future cash flows. A proper data analysis and predictive analytics can shield from some hotel design & construction issues.

Save time and money

Issue related to the design & construction can contribute up to 40% of delay causes; and up to 60% of the total costs of the project. Sixty percent of delays occur due to changes in design caused either due to initial non-compliance to corporate standards or owner’s own will. Five percent of construction delay causes are the last minute design changes, which can cost the change owner time, on average up to 55 days.

When a hotel investor can sit together with an operating company, construction partner, designers, architects and in real-time see what kind of changes will affect the bottom line and create future value – this is when the new era will come and break the silos and information isolation. Lack of communication, understanding or trust between the owning and management company is on top of the list of delay reasons coming from the hotel management side. So, we can only imagine the impact which real-time modelling and big data analysis can have on project timelines and hotel development costs. It can also improve the general feeling of apprehension towards each other, and boost the level of reliability of all contractors.

External Data

Combining not only internal data but crossing it over with external information can reduce the project delay risks. For instance, feeding the data from weather reports can decrease the chance of project delay by 4%, shielding from unfavorable or unforeseen weather conditions. Important economic conditions such as oil prices, to which the building costs are often tied up can positively affect the project financial forecast. Political activity data, resulting in changing labor and material costs shall also be taken into account in the project modelling. 

Agile Future

Hotel development projects are entering the time of a very agile environment which is analytic. And when it concerns the consumer, we have to be agile because the consumer's changing.The investments and design decision-making process will be validated through the prism of customer’s data. Imagine, in future each time there is a new milestone or a new design change in the project, it will be automatically sent for approval by marketing. The future predictive modelling of a hotel room will not only show it in 3D or as virtual reality in real-time but forecast the cash flows based on the customer data, potential customer segments, their behavior, and revenues.

Sources

HVS Hotel Development Survey, 2012/2013
Educational Strategies for the Next Generation Leaders in Hotel Management ( Feng, Stocklin, Wang 2011)Root Causes of Hotel Opening Delays in Greater China (Noordzy, Whitfield)
How Big Data And Analytics Are Transforming The Construction Industry