6 NEWS N o v e m b e r 2 0 15 | Ho t e l M a n a g e m e nt . ne t Labor shortages behind ballooning construction costs Hotel developers nd it challenging to keep tabs on the trajectory of cost increases By Stacey Mieyal CONTRIBUTING EDITOR The Luxury Collection’s brand update is occurring during a period of increased growth for the Starwood brand. NATIONAL REPORT – e ourishing hotel pipeline could be tem-pered by increasing construction costs rather than a slowdown in demand. Hotel developers are reporting enough volatility in construction costs to derail projects that had previously penciled out six months ago, along with modifying project plans. But the increase in construction expenses is not from materials costs, it is attributed to the steep competition for labor on job sites. Labor costs have had a growth rate of about 4 percent to 5 percent during the past couple of years, according to Attilio Rivetti, VP at Turner Construction Company, who prepares the Turner Construction Cost Index. Turner evaluates the cost index on three factors: labor costs, material costs and global market conditions. is includes competition and availability of work force, which always have an impact, Rivetti said. “ e labor costs might have a consistent 4-percent increase and the material cost increases may be at a consistent 2 percent, but the amount of working going in place may have increased dramatically, so it impacts the availability of labor, so costs go up.” And it’s not just wages going up, Rivetti added. Sometimes builders are bringing in labor from another state so you have those ancillary costs for lodging. e ird Quarter 2015 Turner Building Cost Index, which measures costs in the nonresidential building construction market in the United States, has increased to a value of 949. is is a 1.17-percent increase from the second quarter 2015 and a 4.52-percent yearly increase from the third quarter 2014. Reduced cost of fuel and manufactured components was o set by a continued increase in construction activity, which drove an overall increase of costs in the third quarter, Rivetti said. Wages are a factor in hotel construction, according to Mark Laport, co-founder, president and CEO of Concord Hospitality See Construction costs | page 73 MARKETING Today’s brands evolve through logo refreshes, image updates Nonresidential construction costs are expected to grow 4.5 percent in 2016, according to Turner Construction Co. The recently opened Homewood Suites Downtown Little Rock (Ark.), built by McKibbon Hotel Group, might have escaped the worst of the cost hikes. See Brand updates | page 69 MCKIBBON HOTEL GROUP MAGNUSON HOTELS Magnuson properties will have the option of customizing their signs slightly to give personality to the location. STARWOOD HOTELS & RESORTS WORLDWIDE
Hotel Management November 2015: Page 6
