The Developer's Digest, August - September 2017 Issue

HAVE YOUR SAY
HAVE YOUR SAY
Property developments are often bigticket
investments with drawn out
timelines and a myriad of risks through
which to navigate. Careful management
of the process is critical as mistakes
can have high-cost implications to
the project. It is in this environment
of intense pressure and uncertainty
that property developers operate.
Hospitality consultants are engaged to
help manage the uncertainty when the
developer decides to invest in this asset
class.
Like their counterparts in other
specialized industries, hospitality
consultants offer their expertise based
on the need of the engagement in
tandem with the stage of property
development. A hospitality consultant
will typically offer professional counsel
and expertise to hotel owners,
developers, operators, restaurants,
clubs, spas and other fields within the
hospitality industry.
It is a commonly held belief that a
hospitality consultant would only
provide operations expertise. On the
contrary, their expertise stretches
into other services such as appraisals,
arbitration, architectural and
engineering, construction and project
management, feasibilities, executive
search, food service, franchise expertise,
legal services, operations review and
sales and marketing, organization
development, research, training,
strategic planning and technology. This
wide range of expertise reflects in the
constituent membership of the body
that represents hospitality consultants
globally, the International Society of
Hospitality Consultants (ISHC).
There are five main stages in a hospitality
investment lifecycle each with a need
for the services of any of the above
hospitality consultants.
STAGE 1: CONCEPT STAGE
At this stage, the developer is in
possession of land. They would want at
this stage to ascertain the best use of the
land with the highest return. This highest
and best use analysis would involve real
estate consultants such as Knight Frank.
If the area has hospitality potential,
a hospitality consultant would be
engaged to determine what the most
viable type of hospitality asset would
work for the area of choice. The role
of the consultant at this stage would
be to undertake market research that
would determine the type of hospitality
asset that would be the best fit for the
area and a financial feasibility study to
determine the most optimal returns that
asset would generate.
In some cases, the developer has the
desire to invest in a particular asset class
such as a hotel, the role of the consultant
would be to refine the concept by
identifying the class of hotel that would
resonate with the supply and demand of
the area.
This intervention is important as
it determines how the final asset
would operate based on demand and
competitive trends. Further, the process
Trianum Hospitality Limited
No. 11 Othaya Road, Lavington
P.O. Box 76576 – 00508, Nairobi
Tel: +254 (0) 2-2317119 / http://www.trianum.co.ke
THE ROLE OF HOSPITALITY
CONSULTANTS IN HOSPITALITY
would give the developer an idea of the
projected cash flows produced by the
asset over a hold period of say ten years
as well as the return on investment and
the projected value of the asset.
It is from this study that the developer
can engage his/her project team to carry
out concept design and preliminary
project costs of the proposed developed.
A strong feasibility study should have a
section on the proposed design brief of
the hotel that would guide the architect
and other members of the development
team.
An important consideration for a
hospitality developer is how the
asset would operate. This is critical
in determining the success of all
subsequent stages in the development
process. The skill and expertise of the
operator will be the single critical factor
in the success of a hospitality investment
and the key to maximizing the value
of the asset. In this regard, a hospitality
consultant can be engaged to carry out
an operator search and selection for a
suitable management company, brand,
or franchise.
They would also assist in contract
negotiation to ensure the developer
is fully aware of the key terms of the
brand contract. Should the developer
desire to engage an international chain,
they should be fully aware of the chain’s
build, fit out and design specifications.
The ideal time for this is at the
preconstruction stage, as incorporating
brand specifications mid construction
would have huge cost implications.
Local consultants that are able to offer
these services include Jones Lang
LaSalle (which has a global footprint),
Barefoot Consultancy, Trianum and PKF.
International consultants may include
HVS (South Africa, UK, UAE, USA & Asia),
W Hospitality (Nigeria), Colliers (UAE),
HTI Consulting (UAE) among others.
STAGE 2: DESIGN STAGE
In the process of detailing the project’s
designs, there will need to use a
hospitality consultant to refine the
hospitality concept with a special focus
on areas related to operation flow
such as the kitchen and laundry. The
advice provided would serve to balance
aesthetics, functionality, and workflow
based on certain ratios that guide
space allocation between the back of
house staff areas, guest spaces and the
interaction of hotel rooms to food and
beverage space across the different
asset ratings.
These ratios and the final workflow and
guest circulation have a direct impact
on the profitability of the asset. It is
not uncommon for the project scope
to change, hence, the developer may
also choose to reach out to a hospitality
consultant for concept refinement.
The consultants’ role would be to work
with the defined concept to ensure
maximized efficiencies of the building.
This may involve some construction
reworks though checks are required
to avoid high-cost escalations. The
hospitality consultant would join the
developer’s core project team to provide
their expertise on space optimization
and workflow that increases profitability.
Hotel operators and independent
consultants, especially senior hospitality
managers, would be able to provide
these services since experience in
operations are paramount in giving the
right advice.
A legal consultant may help define the
contractual interaction between various
operators in cases where spaces within
one asset have different operators such
as specialized spa or health and fitness
operators, specialty restaurants or bars
or casinos.
STAGE 3: CONSTRUCTION STAGE
As mentioned earlier, it is best to start
with the end use of the asset in mind and
select an operator, brand or franchise
at the conclusion of the feasibility
study before the detailed design and
commencement of construction.
In cases where this was not determined
at an earlier stage, the developer may
require an operator introduced once
construction is in progress.
The determination whether the property
would be under a management
contract, owner operated or leased
to a hospitality operator requires the
expertise of hospitality consultants who
are able to present the contractual and
financial implications of the various
business models by projecting the cash
flows between the parties.
Local firms such as JLL, Unlimited
Directions and Trianum with experience
in negotiation and administering
management contracts may be best
placed to handle this task. Additionally,
during the construction period, a
hospitality consultant can be engaged
to procure furniture, fittings and
equipment (FF&E) in accordance with
the operator’s standards.
Many international brands have very
detailed brand specifications that are
not easy to meet within the local market
hence requiring international sourcing
and long lead times. Consultants such as
Turea (Kenya), Hotel Spec (South Africa)
and WATG (UK) offer these services and
work closely with interior designers and
operators to purchase the right quality
and quantity of items.
STAGE 4: PRE-OPENING STAGE
Once construction of the hospitality
asset is complete, handed over and the
FF&E is in place, it is the time to put all
the final pieces together. This includes
the procurement of operating supplies
and equipment (OSE), installation
of information, communication and
technological (ICT) as well as financial
systems, establishing of procuring
licenses and permits and hiring and
training of staff to be able to deliver the
required level of service.
Again, hotel operators and independent
consultants, especially senior hospitality
managers, would be able to provide
these services. In addition, specialized
consultants like OKAL or HVS Executive
Search for training and recruitment or
Hospitality Systems Consultants (HSC)
for ICT system set up may be required.
STAGE 5: MANAGEMENT
AND EXIT STAGES
Hospitality consultants help the investor
achieve their objectives by de-risking the
development in the early development
stages; however, making the investment
viable during its operation life cycle
is what ensures achievement of the
owner’s objectives and maximization of
returns.
If an operator is managing the day-today
operations under a management
contract, then the role of asset managers
like CHM (USA) and valuation specialists
like HVS (South Africa) and JLL (Kenya)
is crucial in tracking performance and
developing strategies for continuation
or exit. These firms can also handle the
valuation and brokerage should exit
become necessary.
In conclusion, the role hospitality
consultants play in the development
of hospitality assets depends on the
requirements of the developer; however,
it is best to engage a consultant at the
start of the project to minimize both
development and operating costs and
risks, which in turn lead to higher returns.
By Samantha Muna, Managing Director
Robert Kimani, Business Development
Executive
Kenya Property Developers Association... Development brings Development!
Kenya Property Developers Association... Development brings Development!
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