How to jump start your hotel development

Jump starting a car is fairly easy, but jump starting a hotel development is a bit more complicated. More things need to be put together than just another car battery and few wires to get a hotel project rolling. In principle, initiating a hotel development is no different from other property developments but some few tweaks here and there. Many developers in Kuwait were exposed due to their lack of understanding to the property development concept which made them misuse their resources. Financial, technical, and managerial skills are some key qualifications a developer would need to properly start a hotel development.

Many companies have not reached a level of professionalism to have a proper corporate business plan or organizational chart that would match developments and objectives. It is essential to have those two aspects prepared before throwing money onto losing investments. For the sake of our article, we assume that developers have identified where, what, how, when, and why to invest. Moreover, hotel development companies should identify their role within the project team in order to avoid redundancies and conflicts between parties during the project life cycle.

Qualified hoteliers with proper financial, technical, and managerial skills would establish a concrete foundation for a well defined hotel project. Based on the studied hotel market and hotel land criteria, the developer can identify the hotel characteristics and create an area program that would work functionality and financially. Hotel characteristics would provide an initial overview of the development cost which includes land cost, consultants’ fees, loan ratios, contingencies, governmental fees, and other factors that would affect the feasibility study. Therefore, the feasibility study would be based on the development cost and both would be updated along with the project progress to achieve the nearest actual investment figures. Having the development costs and feasibility study completed, the next step in the development would be starting to contact third party professionals to delegate the needed expertise in the project such as hotel operator, project and construction managers, and consultants. Outsourcing services depends mainly on how qualified the internal staff is in handling required responsibilities. The developer drives the project before land purchase up until the early design phases and then gradually hands over the responsibilities to third parties but with supervision during a so called stirring meeting that is usually held weekly. Based on the development cost and feasibility study, the hotelier must have a clear vision how his guestroom, lobby, F&B, recreational, and public area should look like. Because guestrooms repeat to more than 100 times, small details play a factor in increase or decreasing the overall hotel development cost.

Many companies have jumped on the “let’s build anything” wagon and stumbled upon financial, technical, and managerial obstacles. Dubai created a dream filled with $ 100 bills with its unbelievable hotel business. Hotels were always 90% occupied which drove developers to start creating hotel portfolios but without the basics about hotel development. As a result, many have been exposed and are in need for professional help that would restore the faulty ways of developing. I believe the current financial crisis would help keep the few good development companies standing because they have done their homework leaving the “Dewaniya” companies suffer the crisis. Hotel development companies should train their staff to have all three skills to become qualified hoteliers and be able to manage a portfolio of developments at the same time.

By Ali Boshehry

Ali Boshehry has an extensive experience in dealing with financial data in many different fields that enabled him to be a dynamic part of the Global Markets Monitor team.