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Marriott Goes Modular

New Development Method Gains Momentum Among Development Community

Thursday, May 18, 2017
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by Keith Loria

Earlier this month, Marriott International unveiled plans to bring about a comprehensive expansion to its initiative to drive adoption of modular construction for hotels in North America, with a goal of signing 50 hotel deals in the upcoming year.

The modular construction incorporates prefabricated guestrooms or bathrooms, whereas the rooms can be manufactured away from the hotel site in a climate-controlled factory. Once constructed, the units get transported to a hotel site, where the hotel’s base podium has already been built.

“The units then get stacked into place by crane, at which point workers complete the building on-site including electrical, plumbing and other finishing work,” said Karim Khalifa, Marriott International’s senior vice president of global design strategies. “Unlike traditional methods, this process avoids time-consuming challenges that can delay construction such as skilled labor shortages and poor weather.”

The hotel company expects to utilize the prefabrication process on roughly 13 percent of all deals for the region this year, which would be an industry first in North America.

“We want to start a movement to change the industry and feel the modular process will be a game changer for our valued development partners,” said Khalifa. “As modular construction gains in popularity, costs will also decrease over time.”

Modular construction has been popular in Europe and Asia for a while, but the method is only recently attracting attention in the U.S., as construction demand across the country eclipses the number of available skilled workers in all real estate classes.

Marriott first championed the idea of modular construction in 2014, after exploring several opportunities with modular companies about manufacturing hotel spaces. The company launched its pilot modular initiative at its 2015 CONNECT conference and has spent time working with select owners who were early adopters of modular construction for their projects, as well as educating lenders about financing such projects.

“We approached a few firms that could qualify this level of hospitality and they went ahead and built guestroom prototypes so we could evaluate them and make sure they would deliver the guest experience we want,” he said. “They designed an entire building using the modular system and we realized that this was something that was going to change the way things were done in the future.”

The belief is that by working with pre-approved modular partners, Marriott’s development partners can open hotels faster, put associates to work sooner and generate revenues quicker, improving the ROI.
“We like it because it’s higher quality and a much more predictable outcome for us,” said Khalifa. “We like to go into new places and find easy ways for our owners to get in at a quality level. We have about 100,000 rooms a year in the pipeline and we’re thinking about how we can get 50,000 rooms built in modular so they get in five months earlier.”

The 97-room Folsom Fairfield Inn & Suites in Folsom, CA, was the first hotel opened under Marriott’s modular initiative last December.

This hotel features the work of Boise, ID-based Guerdon, which produced units that contained two fully outfitted rooms—including a bed, desk and toilet—plus a connecting corridor. The units were then transported to Folsom for completion. The hotel opened two months ahead of time, enabling the owner to generate revenue sooner than anticipated.

Currently, Marriott has four other hotels in various stages of construction under this initiative, including a Courtyard in Pullman, Wash., and an AC Hotel in Oklahoma City, both of which are set to open in the second quarter. The other two expected to open later this year are AC Hotels in Louisville and Chapel Hill.

“Our franchisees are really real estate entrepreneurs and this supports them being successful,” said Khalifa. “We like it because it’s higher quality and a much more predictable outcome for us. We like to into new places and find easy ways for our owners to get in at a quality level.”

While some lenders may be skeptical at first because this is new technology, Marriott has spent time educating its investors and lenders on the benefits of building rooms in a factory and proving that structurally, the modular rooms were just as strong, and that the quality was going to be better than what was normally seen in the field, according to the company.
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