THE CONSTRUCTION COST CRUNCH The construction cost crunch of recent years compels businesses of all types to rethink their capital projects. try are caught between “can’t afford” and “can’t afford not to.”
centage increase in U.S. history, and more than five times higher than the 3.6 percent average annual increase. While construction inflation is coming down in 2024, construction costs remain sky-high.
This three-part series tackles construction costs from three perspectives: due diligence, “saving, by design,” and revenue growth. It offers real-world strategies to battle this trend and come out on top. —J.A.
With the arrival of the pandemic in 2020, con- struction costs soared 40 percent over a three- year period. Building prices climbed 20 percent in 2022 alone. This figure is the highest per-
These costs are taking their toll. Many needed capital improvement projects within the indus-
PART 3
REV YOUR ENGINES!
A focus on project revenue can make the difference between breaking even and a meaningful return on investment.
private parties and special events? Four seasons. The “Four-Season” time clock acknowledges the advantage of spreading the cost of a building over multiple seasons. It is very difficult today to justify the cost of a new building that is used little more than 100 days per year. Already, many resorts pursue sum- mer programs, weddings, and other spe- cial events. Nevertheless, the quest for multi-season use becomes more chal- lenging when a resort juggles numerous on mountain assets. And the spring and fall shoulder seasons are always difficult to program. That makes it important to ask the right questions and explore for viable solutions based on a facility’s location, setting, and fundamental attributes. An example: Given Bretton Woods’ proxim- ity to the historic Mount Washington Hotel in New Hampshire, Omni Resorts designed its mountaintop Rosebrook Lodge not only for skiers and riders, but also to serve as a year-round, expe- riential-based dining option for its hotel guests. The facility also provides the resort additional meeting and confer- ence space; the ski lodge was named the “Best New Conference Facility” by Hospi- tality Design in 2023. In Utah, Sundance Mountain Resort offers art programs and summer theater to supplement more typical summer operations. These offerings fill rooms during the shoulder season and under- score Sundance as a place for art and cul- ture in addition to mountain sports.
BY JOHN ASHWORTH, PRINCIPAL, BULL STOCKWELL ALLEN
SET YOUR TIME CLOCKS Given the cost of construction, new or renovated facilities will need to wring out every dollar, all day and every day, throughout their 20- to 30-year lifespan. To maximize revenue, we suggest using three simple tools to move beyond com- modified expectation. We call these tools “Revenue Time Clocks.” 24/7 time. The first, a 24/7 time clock, can be used to determine how a building can generate income morning, noon, and night, ideally 24 hours a day, seven days a week. With an expensive building, consider how and when that building can drive revenue. For example, a small café positioned near the restrooms can serve a quick breakfast or snack to arriving guests without having to open the entire food service operation. Throughout the day, the café can serve hot beverages and grab-and-go items to guests coming in for a quick break. At the end of the day, it can become a place to grab a snack for the ride home. Other considerations: How will the bar and outdoor deck areas promote après ski? Where does the band play? Are there further opportunities to host
Parts 1 and 2 of this three-part se- ries laid the foundation for successful strategies to hedge against today’s high construction costs, particularly in resort locations where labor shortages and on-mountain construction further augment the cost of doing business. Savvy preparation and smart design are critical first steps in saving real money over the life of a project. These are largely defensive steps, however, based on empirical models and/or best practices established by others. With revenue, on the other hand, you can go on the offensive to move the needle into the green zone. Revenue is a straightforward con- cept. For every dollar spent, you hope to see that dollar again (and then some) as a return on investment. The bigger the spread, the better. But if the goal is to turn straw into gold, there is a still the reality of sup- ply and demand. Straw, by nature, is a commodity; the more ubiquitous your product or service, the more difficult it becomes to raise top-line revenue above costs. A bit of alchemy is required to transform a 25-cent cup of coffee into a Starbucks latte, say.
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