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
This guide explains
development and asset the relationship
management needs of
hotel owners, operators and
between the
developers from initial feasibility design and the
through to planning, design,
construction and operation.
costs of hotel
development and
Before there is a design, there is
an idea for a hotel. Assessing the
demonstrates
feasibility of a hotel development the benefits of
requires you to understand what
the market opportunity, needs
obtaining cost
of the market and cost of the advice throughout
development are.
each stage of
the development
lifecycle.

4: INTRODUCTION
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.
By providing an analysis of cost
by area and function, the cost
consultant’s 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.
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.
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 all-
day 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 2.5m² 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
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.
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.
Meeting and function rooms
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 750m². The general
allowance for calculation of the
net area of the ballroom / banquet
hall is in the region of 1.20m² per
seat. The minimum total number of
seats is the equivalent of 1.5 to 2.0
times the number of guestrooms.
DESIGN :15
Junior ballroom Pre-function areas /
and function rooms break-out space
In addition to a main ballroom / These should be approximately
banquet hall, the hotel may have 33% of the area of the ballroom,
a junior ballroom and smaller banquet hall, junior ballroom,
function rooms. A junior ballroom function and meeting rooms.
typically has a seating capacity
of 400 to 500 people.
Support areas
Function rooms that double up as
meeting rooms should be a series All of the above areas exclude
of rooms catering for groups of supporting areas such as furniture
20 to 50 people. There should be at stores, restrooms, general storage,
least three of this type of function AV control rooms, interpreters’
room. In addition, there may be rooms and so on. As a rule of
a provision for a boardroom with thumb, these would be allowed on
a size of around 50m². The total a square metre per seat basis.
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
General public areas
The general public area of a hotel (c) Commercial space
may include: These spaces are often let out.
Often there are around four to five
(a) Business centre, including
such outlets in the hotel.
• A reception / waiting area
(d) Front lobby and front office
• A secretarial area This covers the main entrance
lobby, which should be a generous
• A small conference /
space. The area allowance is
meeting room
calculated on the basis of a square
• Small booths / offices metre per hotel room. Supporting
the main entrance lobby is the
(b) Health club / fitness centre
lobby waiting area. An allowance
Space should be allocated for:
is made for 20 people on the basis
• An entry area of 2.3m² per person. These areas
generally have higher or double-
• Common facilities such as
volume ceilings and pricing should
reception, examining room and
take this into account.
nurse’s room
• A beauty centre
• A men’s and women’s spa
• A fitness centre and gymnasium
• A spa restaurant / juice bar
• Employee facilities such as
lockers, lounge and restroom

DESIGN :17

Provisions should be made for
male and female restrooms, with
the female restroom slightly
larger to allow extra space for a
vanity area. A janitor’s 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.
18: DESIGN
Back of house, support
and services areas
These are the non-public areas of
the hotel. There should be minimal
interior designer’s 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 operator’s room,
cashier’s room and counting room.
• Safe-deposit box, stationery
storage, general office and pantry.
• Executive offices containing • Catering / banquet offices
the offices of the general containing the offices of the
manager, resident manager, catering manager, banquet
food and beverage manager, representatives, convention
assistant food and beverage services and secretarial area.
manager, general office areas,
• Accounting offices containing
executive boardroom
the offices of the financial
and storage.
controller, assistant financial
• Sales offices containing the controller, accounting work
office of the sales director, area, payroll manager, general
sales manager, market analyst, office and storage and men’s
sales executives, group sales and women’s restrooms.
co-ordinator, public relations
manager, reservations manager,
general office, conference room
and storage.

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
• Laundry areas containing the
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 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 • Mechanical areas usually cover
housekeeping and laundry two major locations, one of
areas are generally made on which is normally in the
the basis of area per key of basement, the other on the
the hotel. Requirements for upper level or roof space of
laundry facilities will vary the hotel.
between locations and between
• Mechanical areas in the
operators. In many instances,
basement contain the
the laundering of bedsheets
engineer’s control room,
and towels is outsourced. If so,
engineer’s office, toilet and
the requirements for in-house
locker, janitor room, boiler
laundries are limited to a small
rooms, fire control pump rooms,
number of domestic machines.
electrical sub-stations,
• Engineering areas containing electrical rooms and wet riser
offices of the engineering tanks.
director, assistant engineer,
• Mechanical areas in the
general maintenance and
upper levels can contain the
secretary, paint shop, carpentry
air handling units, domestic
shop, upholstery shop, plumbing /
water tanks, sprinkler tanks,
refrigeration shop, electrical
wet riser tanks, condenser
shop, key shop, TV repair shop,
water storage tanks, electrical,
parts storage, energy
switch and power rooms,
management computer room
although these may also be
and janitor’s store.
housed at the basement level if
space allows.

24: DESIGN
(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 1 200 200

2. Queen rooms 1 100 100

3. Accessible rooms 1 20 20
(circa 5% of total room count)

4. Other standard rooms 1 55 55

(eg twin)

B. Suites
1. Junior suites 2 40 80

2. Executive suites 3 10 30

4. Presidential suites 5 2 10

5. Club lounge 5 - 5

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 80m² to
over 120m² 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 60,000m².

DESIGN :29
The breakdown between the
bedroom zone, public areas and
back of house for a notional 500-
bay, 50,000m² hotel would be:

A. Guestrooms and suites 22,500 to 30,000m² 55 - 60%

B. Public area 10,000 to 15,000m² 20 - 30%

C. Back-of-house 7,500 to 12,500m² 15 - 25%

administrative, support
and services areas

Hotel total gross area 40,000 - 57,000m² 100%

Based on the above hotel floor
areas, the gross area per bay
ranges between 80 to 115m².
The net areas of the bedrooms
(including bathrooms) varies
according to geographical location,
from a low of about 35m² up to
about 55m² but typically between
40 and 50m² 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:
a. Site location, shape, conditions,
means of access and visibility
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
h. The level of provision and
facilities of rooms
i. The storey height – if
exceptionally high, it will
need a heavier structure,
more complex foundations,
additional lifts and fire-
fighting 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
The choice of guest Another area for careful
consideration is the location of
room configuration the bank of guest and service
lifts rising up to the guestrooms.
can affect area These should be located centrally
to the guestroom block and the
efficiency by as guest lifts should descend into the
entrance lobby, where pedestrian
much as 20% traffic can be monitored by the
front desk.
of the gross A third major consideration is the
configuration of the guestroom
floor area. 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.

38: COST
Ideally, the efficiency of the The following factors must be
guestroom zone should be in considered:
the region of 75%for a tightly
a. Number of guestrooms
designed, double-loaded
per floor
corridor layout. However, for a
single- loaded corridor or atrium b. Lift location and escape
layout, the efficiency can drop staircase cores
as low as 60%. Obviously, the
c. Shape of guestroom tower, as it
higher the efficiency, the more
affects the wall-to-floor ratios
economical the construction cost.
It is critical to ensure the design d. Corridor configuration
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.

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 fire-
escape 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 Examples of different
standardised. For a five-star hotel configurations are shown below.
it would be rectangular in shape,
in the region of 40 to 50m² 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.
The single-loaded corridor configuration is
Good workable dimensions are
less efficient as the corridor serves only one
approximately 4.5m by 9.1m. The
set of guestrooms. Efficiency is in the region of
width should not be excessive,
65% or less.
as it increases the length of the
corridors, the cost of the structure
and affects the external walls of
the bedroom zone.

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
more rooms per floor, with minimum effect on
external walls and finishes. Efficiency is in the
region of 75%
The rectangular configuration is not efficient,
as it requires additional corridor lengths to
serve end rooms. Efficiency is in the region of
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%.
44: COST
The atrium configuration is served by single-
loaded 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%.
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
hotel’s 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 $/m² should,
however, be more reliable.
COST :47
With the preliminary costings in
place, a construction cost cash-
flow 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 developer’s design team
should design the hotel to
provide the functional areas
necessary to meet the hotel
operator’s 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 value-
engineering (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 The initial budgeting process
may suggest alternative minimizes time spent pursuing
construction methods and design options that are either not
advise on the range of products affordable or do not produce the
and materials available in the required financial return.
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
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 USD/m2 (GBA) USD/key %

8,544 m2 153 keys

Structure and envelope 6,072,299 711 39,688 19%

Internal fit-out 1,667,432 195 10,898 5%
Building services 11,027,489 1,291 72,075 35%
On-cost 7,062,250 827 46,158 22%
FF&E 5,819,339 681 38,035 18%
External works 263,350 31 1,721 1%
Total 31,912,160 3,735 208,576 100%

* Cost models based on a mid-market product

52: COST
Russia

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

6,493,440 760 42,441 29%

358,848 42 2,345 2%
5,510,880 645 36,019 24%
3,740,300 438 24,446 17%
5,615,579 657 36,703 25%
854,400 100 5,584 4%
22,573,447 2,642 147,539 100%

COST :53
 United Kingdom

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

Structure and envelope 7,800,037 913 50,981 26%

Internal fit-out 3,785,507 443 24,742 12%
Building services 7,543,701 883 49,305 25%
On-cost 5,197,200 608 33,969 17%
FF&E 5,819,339 681 38,035 19%
External works 263,350 31 1,721 1%
Total 30,409,134 3,559 198,753 100%
Cost models*
Middle East
Dubai

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

Structure and envelope 5,885,147 689 38,465 23%

Internal fit-out 3,022,309 354 19,754 12%
Building services 6,289,284 736 41,106 25%
On-cost 4,250,100 497 27,778 17%
FF&E 5,356,243 627 35,008 21%
External works 351,767 41 2,299 1%
Total 25,154,850 2,944 164,411 100%

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

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

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

8,116,800 950 53,051 24%

3,844,800 450 25,129 11%
8,116,800 950 53,051 24%
3,844,800 450 25,129 11%
9,825,600 1,150 64,220 29%
427,200 50 2,792 1%
34,176,000 4,000 223,373 100%

COST :57
 Saudi Arabia

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

Structure and envelope 5,002,375 585 32,695 23%

Internal fit-out 2,568,963 301 16,791 12%
Building services 5,345,891 626 34,940 25%
On-cost 3,612,585 423 23,612 17%
FF&E 4,552,807 533 29,757 21%
External works 299,002 35 1,954 1%
Total 21,381,623 2,503 139,749 100%

58: COST
Cost models*
Africa
South Africa

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

Structure and envelope 3,875,822 454 25,332 24%

Internal fit-out 1,380,676 162 9,024 9%
Building services 5,598,122 655 36,589 35%
On-cost 2,808,660 329 18,357 18%
FF&E 2,136,503 250 13,964 13%
External works 146,327 17 956 1%
Total 15,946,110 1,866 104,223 100%

* Cost models based on a mid-market product

60: COST
Nigeria

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

6,965,981 815 45,529 24%

2,496,952 292 16,320 9%
10,076,620 1,179 65,860 35%
5,055,780 592 33,044 18%
3,845,742 450 25,136 13%
263,389 31 1,721 1%
28,704,464 3,360 187,611 100%

COST :61
 Nairobi

TOTAL USD USD/m2 (GBA) USD/key %

8,544 m2 153 keys

Structure and envelope 3,978,504 466 26,003 24%

Internal fit-out 1,243,969 146 8,131 8%
Building services 5,080,700 595 33,207 31%
On-cost 2,821,440 330 18,441 17%
FF&E 3,281,781 384 21,450 20%
External works 160,960 19 1,052 1%
Total 16,567,354 1,939 108,283 100%

62: COST
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

0
UK

Spain

Russia

Dubai

Qatar

Saudi Arabia

South Africa

Nigeria

Nairobi
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

0
UK

Spain

Russia

Dubai

Qatar

Saudi Arabia

South Africa

Nigeria

Nairobi
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 The main advantage of completing
encountered forms of the design before construction
procurement for hotels are briefly commences is the fact that the
described below: contract cost is established in
advance of entering into the
contract and work starting on site.
Traditional lump sum
The cost risk to the developer is
Traditional lump-sum contracts, therefore relatively low. Control of
based on full bills of quantities or design and quality remains largely
priced schedules of work, provide in the hands of the developer and
an essential means of letting the design team.
and cost managing the work as
If properly set up and
it proceeds. However, they do
administered, this can be a good
require all design to be finalised
form of contracting to produce a
and detailed, and complete
high-quality hotel.
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
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, five-
star 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 risk-
sharing arrangement.
Procurement management
The cost consultant will be actively
involved in establishing detailed
procurement strategy to cope with
the client’s 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. AECOM’s 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 From initial feasibility through

relationship between the design, procurement and
design and the costs of hotel construction, the role of the
development and demonstrates construction cost consultant is key.
the benefits of obtaining cost
We hope that you have found
advice throughout each stage of
this guide a useful source of
the development lifecycle.
information and guidance for your
Successful hotel development hotel projects. We would welcome
requires not only an the chance to discuss it with you
understanding of the market, in greater detail.
but also the ability to design and
At AECOM we offer a range of
procure the right product at the
services that meet the development
right price.
and asset management needs
To achieve this you need to of hotel owners, operators and
understand the relationship developers from initial feasibility
between design and cost and through to planning, design,
have knowledge of the latest construction and operation.
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
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 world’s 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

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