Hotel Business caught up with Bill Wilhelm, president of Irvine, CA-based R.D. Olson Construction, for his take on construction trends in hospitality, and his company’s latest hospitality projects.
How have things changed in hotel construction since you joined R.D. Olson nearly 25 years ago? Over the years, brands have really homed in on their guests’ needs in terms of amenities, and there is an increased focus on providing community spaces that are tailored to the unique needs of that location’s guests. For example, a traveler’s lounge equipped with lockers and showers may be incorporated into the local airport, while an outdoor lounge with fireplaces is better suited to a hotel in wine country.
The hospitality industry has also found substantial value in incorporating construction and design elements that reflect the character of the local neighborhood and in consulting local partners throughout the planning and construction process. This important process allows visitors to feel part of that community throughout their stay and generates buy-in for the project from area residents.
How do the next 12-24 months look for the industry? What are your expectations? How do you think the market’s current landscape will affect the projects you’ve lined up? The hospitality industry has been booming for some time. The landscape is ripe for continued opportunities, but moving forward, the industry will likely start taking a more cautious approach. We expect to see another two years of sustained growth in a variety of market segments, particularly for adaptive-reuse projects. As new-construction, material and labor costs continue to rise, repurposing existing spaces is typically more cost effective and allows developers to get heads in beds and start generating revenue faster. Adaptive-reuse also shortens project timelines, which allows developers and builders to be nimbler when adjusting to new trends or changes in supply and demand levels.
Did 2017 live up to your expectations? 2017 certainly lived up to our expectations. We met our goal of growing existing relationships and built new ones, which has always been our top driver of success. Continuing to deliver on our promises allowed us to foster true partnerships and execute effective project negotiations last year, and we look forward to continuing this momentum into 2018 and beyond.
What have you been seeing with regard to lead times and material supply? How has this impacted your business? The supply for numerous materials has compressed, especially lumber, metal and finish products. It’s essential that materials are planned for and procured as early as possible during a project’s planning phase. Supply shortages often result in increased lead time, and project timelines need to account for the delay. To guarantee project success, it’s more essential than ever that order quantities are accurate the first time and material substitutions are readily available in case of unexpected supply shortages.
Labor supply has been a challenge for many construction companies. Would you say that’s true for you? How have you mitigated that, and how do you see it playing out in the future? The lack of available labor presents a significant challenge for the construction industry. Employees, sub-contractors and other project partners have more choices than ever about whom to work with, and we’ve found that it’s important to strengthen these relationships to increase our company’s value proposition. By continuing to focus our resources on recruiting and retention efforts internally, as well as our relationships with outside partners, we have been able to help minimize the impact of the industry-wide labor shortage. There is a real sense of camaraderie within our company and we always put people first, which helps to create loyalty. We certainly still feel the labor shortage’s effects, but by delivering on our promises and closely monitoring workloads, we have been able to manage this resource challenge.
Are there any other external factors you’ve got your eye on that could affect your business? The industry-wide labor scarcity and materials shortage, coupled with the booming hospitality market, can result in companies overcommitting on the number or scope of projects they take on. It’s important for construction companies to take these resource limitations into account when committing to new projects and creating project timelines so they don’t become overextended and unable to deliver on their promises.
How easy is it to find good development sites currently? Development sites have gotten tougher to find, and primary markets are the most desirable. If an investor and the area they choose to build in are both open to the type of hotel being developed, with the right property positioning, there is a real opportunity to make a difference in the community.
Have you noticed any trends in what owners/developers are looking for when it comes to their new projects? With our recent hospitality projects, we have seen a trend in owners and developers wanting to bring the community together by incorporating amenities that are open to the public, such as meeting and event spaces, restaurants, bars, lounges and cafés.
A recently completed R.D. Olson Construction project, the Irvine Spectrum Marriott, offers more than 9,000 sq. ft. of indoor meeting facilities and a large event lawn to accommodate corporate events, parties, concerts and weddings. It also has one of the highest and largest rooftop lounges in Orange County with a full-service bar and sweeping 360-degree views.
Additionally, Lido House Hotel in Newport Beach, CA, which is currently in progress, will be an iconic landmark for the oceanside community. From its Cape Cod style, which complements Newport Beach’s high-end, low-stress beach community, to its full-service restaurant and luxury spa, the location offers community residents the comfort and relaxation of a vacation.
Are you seeing a lot of mixed-use or dual-brand projects? Yes, dual-brand projects have become more common over the years, as they provide developers with more flexibility and can be a good option for challenging sites. Recently, we completed H Hotel, a dual-brand hotel near LAX comprising Homewood Suites on floors two through six and Curio by Hilton on floors seven through twelve. The dual branding allowed the owner to provide a wider variety of experiences for guests at different price points.
Where do you find the projects that you are involved in? We find new projects through the relationships we have established and maintained with our clients, and referrals from those who respect our final product and have enjoyed working with our team. Our commitment to meeting our clients’ vision through solution-driven teamwork, fast-track construction and a proven expertise in our trade allows us to continue building our portfolio, specifically in the hospitality industry.
What types of projects are you seeing? Renovation? New construction? Property Improvement Plans (PIPs)? The demand for renovation and adaptive-reuse projects has increased over the years, particularly in high-density markets. Most of our current projects are large-scale renovations or adaptive-reuse—offering a solution for the lack of land supply for new-construction. Some of our recent adaptive-reuse projects include H Hotel, which was adapted from an office building originally constructed in 1962, and the West Coast’s first NoMad Hotel, which was adapted from the historic Bank of Italy Building in downtown Los Angeles.
That being said, we are still seeing ample demand for new-construction in the hospitality market, especially in secondary and tertiary cities where there is more land available.
PIPs are no longer solely being driven by changes in ownership. They are now a necessity as older properties are forced to update in order to compete with newer ones right down the street.
Is there anything that would make you not want to take a project? At R.D. Olson Construction, we have a commitment to excellence. For us, every detail counts. A project that conflicts with our ability to meet and exceed our clients’ expectations because of limited resources would not be within our realm.
Are there locations you are looking to pick up work in? Right now, we have our eyes set on most primary markets with a strong economic growth in business, leisure and residential planning. This includes major downtown metro areas, commercial and residential master development and projects in coastal areas.
Tell us about some of the projects you have on the horizon. This spring, we will complete Hotel Trio, an 82,638-sq.-ft., 122-room hotel in the heart of Sonoma County’s wine region. Located in Healdsburg, the hotel is within a 30-mile radius of the hundreds of wineries in Dry Creek, Russian River and Alexander wine valleys, giving it its “Trio” moniker. Amenities will include a bar, meeting room, outdoor pool, BBQ area, lounge, fully equipped fitness center and multiple outdoor patios with fireplaces.
We are also working the ground-up construction of the six-story, 180-room AC Hotel in El Segundo, CA, which will feature a rooftop terrace with a bar and lounge, and is scheduled to open in spring of 2019.
Additionally, we are almost complete with the previously mentioned Lido House Hotel in Newport Beach.
Any advice for hoteliers in the coming year? The key to constructing a hotel that meets your needs, delivers on time and ensures safe construction practices is to partner with an experienced builder who can guide you through all design, cost and phasing aspects. HB