Hotel Construction Companies, How much can you rely on them?

After writing about my experiences with some hotel architects and designers, I like to share today my experiences with hotel construction companies here in south-east Asia.

Again, the most important lessons I learned written right here at the beginning.

“Some of the most reputed construction companies might be the worse choice as they do not know ANYTHING about the construction of a hotel, resort, or about the importance of high quality “finishing” and “attentions to details”.

“Many construction companies do NOT CARE AT ALL and will not tell you if your architectural designs are wrong – even they know!”

Let me give you some facts:

  • Fact is that some of the best known and most reputed construction companies might not be your best choice to build your hotel as their main experiences might well be civil work such as building bridges and highways.
  • Fact is that all construction companies will keep a very good record of any V.O. (Variation Order) to blame the owners later for any delays or shortcomings.
  • Fact is that most construction companies will follow strictly the architectural designs – even when common senses and human logic indicates that the design is wrong!
  • Fact is that most construction companies actually do love additional VO’s as they generate additional income and generate excuses for their own failures and shortcomings.
  • Fact is that most construction companies make good money not only with the actual construction work; but also with construction materials such as steel, cement, wood, etc. So, for bigger projects it is well worth to arrange certain construction material through your own purchase department. But we aware, your people need to be good, experienced and fast with purchases as you might end up with additional blame for possible delays! But if you feel confident, you can save a fortune!
  • Fact is that most construction companies do not care when you will open your hotel as they simply don’t care at all about your income, they care about their own income only!
  • Fact is that even with a solid construction contract signed which clearly written hand-over dates, you will never want to end up in the courts as this is a ‘lose-lose’ situation! In the end, nobody wins!
  • Fact is that in worst case scenario, you most properly will/cannot use the construction contract against the construction company as they might walk out on you even before the project is finish knowing you will not want a court-case as they got lots of VO’s to justify delays and shortcomings, and knowing that a court case will take many-many years here in south-east Asia.
  • Fact is that most construction companies misunderstand the hotels opening date. Construction companies believe that if the opening date is 1st. December, they have time to work until 30th. November, and then will start to clean up and move out.
  • Fact is that most construction companies believe they still have time to finish construction work during the ‘soft-opening’ period. “Soft-Opening period” is NOT “Construction period” – however, minimal defect work can be accepted.
  • Fact is that some construction companies don’t do the work themselves! They hire cheap 3rd. grade sub-contractors and make a profit that way.
  • Fact is that your hotel construction project is always at risk ending up with a ‘bad finishing’ if you choose the wrong construction company.  Your dream of having a 5-star hotel product might end here… having a 4 star product for a 5-star investment.
  • Fact is that I have never seen a hotel opening on time – here in Thailand!

My recommendation:

  1. Always check reference with the actual owners or investors of other properties ONLY. Do not rely on information from other people such as architect, the future management, designers etc.
  2. Select a few construction companies with solid reference and then let them quote for your project. (Please do ALWAYS’s check the reference very careful!)
  3. Always ensure you know from the early beginning what work will be done by the main-contractor and what work will be done by sub-contractors.
  4. As from the early beginning for the company names of any subcontractors and check their references as well.
  5. Do employ the service of a good CM (Construction Management) and check their references as well.
  6. Ensure your construction company is financially stable.
  7. Ensure that the scheduled construction meeting always includes the decision makers from the Construction Company, architect, designer, CM and owner/owner representative.
  8. Ensure that written record for all construction meetings are prepared by the owners and approved by owners before released to all concerned (Usually some subjects and issues which might but the contractor or your CM in difficult situation are not recorded)
  9. Ensure that the attendance sheet is signed by each ‘decision maker’ and a copy of it is added to each written record of meeting.
  10. Ensure each written record of construction meeting is confirmed for its correctness at the beginning of the following meeting. E.G. each new written record of meeting to show at point one that.
  11. Owners/Owner representative must participate at meeting all the times. Usually they participate only the last 6 month before opening when it is clear that there will be delays and then it’s too late!
  12. Ensure all stakeholders understand the meaning of the ‘finish date’!  – “Finish” should mean: “Finish construction; finish M&E; finish interior, finish inspection, finish defect work etc”. “Finish “means handed over and signed as accepted.

Some of you readers might think most of the above is very basic, but here in south-east Asia, some of these important basics are all too often not followed.

Klaus R. Rauter

Managing Director

Mai-BS (Thailand) Company Limited

http://mai-bs.com

Posted in Uncategorized

9 thoughts on “Hotel Construction Companies, How much can you rely on them?

  1. Hy,
    I would like to open a resort in Phuket.
    I am wondering if it is still possible to get a 3 stars quality building at the cost of 12.500 THB per sqm in 2012?
    Thank you for any reply.

  2. THB 12,500 will be hard to achieve at expensive Phuket.
    Right now the average cost is THB 18,000 including M&E per square meter.

    Approx THB 13,000 you may get form very small construction companies excluding M&E (M&E = Electric Water, plumping etc)

  3. I had invested on 3500sqmts land in north pattaya and i am looking to construct 4 star hotel. Can u help me by suggesting any good construction companies in thailand . Waiting for your early reply.

    Mai-BS
    We already contacted you… hope the info will help.

  4. Hi,

    I am seeking the head of quantity surveyor or contract manager.

    regards
    Cavan lee
    +65 92489449
    Singapore

  5. I want to make a hotel in pattaya can you help me what is the process for start this.
    Thanks

  6. We r commercial kitchen equipment manufacturer so if u hv ny site for hotel or restro in eastern region or Bangladesh plz inform us.

    Regards
    Anand jaiswal
    91+9831104403
    West bengal

  7. I was looking around at information and not sure when this was written. September 2017 ? As the construction costs quoted seem to be out of sync from what I understand. It is very hard to quote a cost without finished drawings and all specifications. So not sure where the costs are coming from above.

    A quality luxury home can cost 25,000 baht upwards and 4 to 5 star hotels are for sure more than that, if you include interior fit out. As far as I understand from hotel companies 4 to 5 star are coming in at 40-45,000 Baht including interior fit out. Then again that is professional hotel brands. A lot of people have little or no understanding of what 4 star or 5 star entails and what the specifications are for such. If anyone thinks hotels such as JW Marriott, Shangri La, Banyan Tree or The Peninsula cost anything near 18,000, they bare deluded. Luxury 5 star hotels cost a lot more, albeit you are talking of 3 star.

    Although I do agree with some of your points but I think its wrong to be so condemning of builders in Thailand. Some of the best hotels in the world are in Thailand and some amazing shopping malls. Also some wonderful homes. So can’t all be bad. By the way having been in construction for over 20 years I know of no company, big or small that does not use sub contractors. It is normal within the industry.

    Construction companies take huge risk and often for little profit. So it is not surprising there can be problems. Generally in life you get what you pay for.

    But apart from the above, I do agree with you wholeheartedly, that one that must be careful.

    1. Dear Khun Charles
      Even this year, (2017) the construction cost should not be more than THB 20,000 per square meter including M&E for 5-star (building! not villas)
      Interior should not be more than THB 10,000.- per square meter. Again we talk about 5-star here!

      Our latest 5-star project in Phuket did cost THB 27,320.- per sqm (Constitution, Interior, M&E — excluding opening inventory)
      I do agree that hotels such as JW Marriott, ShangriLa, Banyan Tree costs more than what we quote, and strangely, they are not the leader in the market anymore nor known as being innovative anymore. Those are standard brands used mainly for asset management and not for solid ROI’s!

      Yes, there are also excellent constitutions companies in the market. Agree 🙂
      My point was that sub-contractors should compliment the main contractors. I know of so called main contractors who use sub-contractors only! (no joke!)

      Construction in Thailand has historically being ‘very’ profitable, but the profit margin trooped a lot 🙂
      Kind wishes
      Klaus

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