Case Study: "Management Is Key"

Over budget and behind schedule are two phrases no hotel owner wants to hear regarding a hotel renovation. Yet, that's where the owners of the Hotel Victoria found themselves with four months to go before the start of construction for the renovation of their hotel. The Victoria is a 350-room luxury hotel in a bustling urban location. The hotel runs high occupancies due to its proximity to a major university. The hotel was in the middle of an eighteen-month-long, multi-faceted, $14 million renovation to enliven the property. As a result, the public areas lacked flow. The front desk was difficult for guests to find, and the restaurant and bar were hidden deep into the first floor, unable to maximize additional business from the pedestrian traffic on the street. To make matters worse, the hotel's guest rooms were tired and needed modernization, the guest room bathrooms needed updating, and the guest room corridors were dark and uninviting. Even with these problems, the hotel needed to remain open during the entire renovation due to prior bookings, so the careful phrasing of the renovation to minimize guest inconvenience was an added issue for the renovation team to deal with. The new renovation would elevate the luxury status of the property, but it needed to be done in time for the university's upcoming commencement ceremonies. The design was set and the owners felt that the scope of the renovation was appropriate. The problem was, they could not find a way to complete the project on time, within the necessary timeline and budget. So, the ownership group faced a difficult decision: do we sacrifice scope, quality, or schedule? Or do we end up sacrificing all three to stay within budget? They knew that none of those potential solutions would be good for the project. At their wits' end, the owners were so frustrated that they were ready to do some wholesale slashing of the project's scope to get the budget under control. They had been working for over a year with a large, local contractor, Rockland & Bowie Inc., and had worked tirelessly with it to try to get the renovation costs in line. Nevertheless, no matter what they had done, the pricing came in more than $2 million over budget. Finally, in desperation, they turned to a third-party project manager, Skip Andrews, to see if there might be another way to look at the needed upgrades. Before resorting to any drastic measures, such as getting rid of big renovation items, Skip analyzed and reviewed the project with all of the parties involved: the design team, the hotel's managers and owners, and Rockland & Bowie. One of the issues that Skip immediately focused on was that Rockland & Bowie was stretched too thinly across several multi-million-dollar projects around the city. Rockland & Bowie clearly couldn't give the Hotel Victoria the attention it needed. Rockland & Bowie was also not set up to simultaneously manage multiple projects within the same space (i.e., public spaces and guest rooms). The contractor's expertise, it turned out, was to do large, complex, ground-up projects. A smaller, more complicated renovation that included working around an operating hotel was not the contractor's forte. Throughout the project, no one had bothered to think about the differences between those two types of construction projects. Skip sat down with the contractor and the design team for several meetings and marveled at their resistance to look for alternatives to the design, construction, and phasing problems. After several meetings, Skip made recommendations to the owners for minor changes to the renovation's scope that would preserve the design intent and make the contractor's forte was not ar design elements. It was important for Skip to get the design team to buy into the changes to the schedule. These recommendations were done to preserve the integrity of the designer's designs and accomplish the design a different way. Skip's recommendations also had a huge impact on the phasing of the project, looking at the projeclookingt scale by several months. That, in turn, saved a substantial amount of money on overhead and general conditions costs for the contractor. Lastly, the hotel would be able to rent the renovated guest rooms quicker, which would translate into less lost revenue from the renovation. The final recommendation was the most controversial. That was to bring in a separate "rooms contractor" to do the guest rooms simultaneously while the general contractor, Rockland & Bowie, focused on the public area work. Rockland & Bowie was offered the opportunity to continue on the project and perform the public area work that was much more suited to its expertise. Skip, the contractor has started calling the various rooms cont worked with for many years with the owners' blessing. One by one, his first question to them was the same: "Do you have the capacity to start a project immediately?" Several contractors were too busy. Finally, he spoke to one, Morgan Contracting Services, that said it had the capacity to do the rooms. Skip sent Morgan Contracting Services a bid package, and within seven days, the owners' budget problem was solved. The room contractor, with lower overhead and more experience with repetitious work, came in with a price significantly below the general contractor's price for renovating the guest rooms. With Morgan Contracting Services working on the guest rooms, Rockland & Bowie could focus its attention on the public areas. Skip then made sure that both contractors utilized the same plumbing, mechanical, and electrical sub-contractors to minimize coordination issues and finger-pointing. Help Skip to manage both the rooms and public areas contracts simultaneously.The project switchback on schedule and $500,000 under budget for the room contractor when all was said and done.The final room contractor result? Happy owners! The Hotel Victoria's renovation project was finished under budget and ahead of schedule. As a result, the owners did not have to sacrifice the scope or quality of the renovation work and were rewarded with an engaging and beautiful hotel. At the end of the day, a few keys lessons were learned by all of the parties involved. First, one of the oldest sayings in construction was appropriate to the way the project should have been envisioned: measure twice, cut once. That is, make sure to think through all of the possibilities and options before jumping into action. Second, use the right tool for the right job. Oftentimes, bringing in a new set of eyes can shed new light on the situation. In this case, dividing the scope of work between two contractors allowed each contractor to focus on one area and utilize its expertise to provide the client with the best prowas heading toward disaster learned a few key lessons before the simple changes in how it was managed were implemented. In the end, it went from over budget and behind schedule to being under budget and ahead of schedule!

Discussion Questions

1. How could the owner have avoided the initial over-budget and timeline issues with the project?

2. How did Skip figure out which issues were causing the timeline and cost problems? What were the issues?

3. What do you think the phrase "measure twice, cut once" means?