Case Study: $60M Hospitality Project
How a Seasoned Hospitality Developer and Global Hotel Franchisee Overcame Shortages with Makom Management
Overview
A well-established hospitality developer with more than 50 hotels successfully developed in a 10-year span began construction on a new project in North Carolina. As a franchisee of a leading global hotel group, the firm had a strong reputation among trade specialists and material suppliers, often using the same select group of companies for each project. This project was valued at $60M.
The challenge
Labor shortages and material scarcities have increased at frequencies not seen in decades. Global disruptions due to the COVID-19 pandemic, in addition to a dwindling trade workforce, are causing extremely volatile swings in contractor and material availabilities. This has not only increased building costs, but for multinational hotel developers, certain materials are contractually required to proceed with development. Even builders with deep pockets are unable to proceed when key materials are out of stock.
Because the developer traditionally conducted design-build methods with the same group of companies, their pool of material suppliers and subcontractors was too small, and they were unable to weather a significant disruption to the supply-chain. After several months of re-bidding, project costs reached an all-time high while essential materials still remained out of stock. Their project was delayed for 8 months. Construction needed to proceed or the project would be abandoned.
About the Project
$60M Multinational Hotel Development
94 Units; 6 Floors
Amenities: Rooftop Bar; Indoor Pool
“The project is sidelined and there’s nothing we can do until TPO is available. On top of that we can’t find anyone willing to bid on a commercial pool job—everything is residential right now.”
“Our structural steel subcontractors are quoting us 20 weeks on fabrication and erection. They can’t even guarantee the engineering shop drawings because of the backlog. ”
Delivering the solution
Although the COVID-19 pandemic created a global shortage of numerous building materials, the US is fortunately home to tens of thousands of material suppliers and subcontractors. Those with strong industry connections or partnerships are able to attain critical building materials at a time when many lack the relationships to do so. As a national construction solutions company, Makom Management maintains relationships with hundreds of trade specialists and material suppliers, offering rare access to builders during volatile periods.
Through working with the developer’s construction team, a strategy was laid out to identify critical building materials consisting of roofing TPO, lumber, structural steel, as well as a commercial pool contractor.
Makom Management secured, vetted, and delivered a structural steel contractor within 6 days. Shortly after, Makom Management secured an out of state roofing contractor with TPO in stock. Fortunately, the lumber market settled during this period and the developer was able to purchase lumber. After one month, Makom Management secured an additional framing contractor and a commercial pool contractor specializing in hotel projects. Notably, the framing contractor was below the initial project budget.
Altogether, Makom Management delivered two material suppliers and three contractors in 35 days.
“Makom Management was crucial for us during this project. They underpromised and overdelivered. ”
Results at a glance
5
Total Contractors & Suppliers Awarded the Project
$950,000
Total Amount of Labor & Material Costs Reduced from Project
1 month
Total Time to Secure All Needed Project Components
14
Amount of Contractors & Suppliers Delivered to Developer