2022 Notice: The Effect of the Pandemic on the Hotel Construction Industry
When the pandemic first emerged in 2020, it shook many industries including construction, which has ongoing repercussions into 2022. What began as a lumber shortage due to an increase in home projects, eventually became a shortage in workers as well as in supply chains. This has resulted in an increase in construction costs of more than 4% in 2021, and a projected further increase in costs of 4% to 7% in 2022.
In addition, many builders and contractors found that there were significant delays in their commercial projects during this time line. This, combined with the fact that the costs of many construction materials used in hotel building such as steel and concrete as well as flat glass and lumber are continuing to have increasing and volatile costs means that there could be further cost increases and delays in hotel building in 2022.
Builders who are looking to break ground may want to consider starting earlier and locking in costs now to help offset rising prices in the future. Starting early can also help offset any potential delays that may occur in the future months due to supply chain issues and worker shortages.
There is an enormous range of costs per square foot for hotel construction. This is because different types of hotels include varying amenities, areas, and materials. In addition, hotels built in urban areas usually have a higher cost per square foot than hotels built in more rural or suburban areas. For this reason, there is a hotel construction cost per square foot range of $134 to $550:
| Hotel Type | Cost per Sq.Ft. Rural Area | Cost per Sq.ft. Urban Area |
|---|
| Motel | $134 - $170 | $180 - $234 |
| 3-Star | $190 - $245 | $250 - $375 |
| 4-Star | $260 - $345 | $350 - $410 |
| 5-Star | $332 - $400 | $400 - $550 |
The costs to build a motel ranges from $134 to $234 a square foot, depending on the state you are building in. Motels are constructed for much less money than larger hotels. They tend to be 2 - 3 stories, have few amenities, and few common areas. Motel rooms are cheaper to rent, making them the perfect choice for someone going on a roadtrip or who does not care about property amenities.
Three-star hotels are considered standard hotels. Building a 3-star hotel costs between $190 to $375 a square foot, depending on the area. They have lobbies, communal areas, and restaurants. They may have gyms and pools as well, although not all include these features. They often do not have as many amenities as other hotels, and the materials are usually standard grade.
Depending on the location, building a 4-star hotel usually costs between $260 and $410 a square foot. Four-star hotels generally include more amenities and better materials than a 3-star. They often have gym and entertainment areas, spas, more than one restaurant, and possibly other shopping and services.
Five-star hotels are luxury buildings that include unique and high-end services for their guests. This increases the cost to build per square foot to between $332 and $550, depending on the area. They include many services, high-end gyms, pools, spas, and restaurants. They also have more communal areas, shopping, and other amenities.
Hotel Construction Cost per Room
While square footage is a popular way to break down the construction costs, many hotels are also priced per room. This makes an easier determination of the project’s total cost by projecting the number of occupants, rather than the overall space. Like square footage, the cost to build a hotel per room varies on the type of hotel, although the location is important too:
| Hotel Type | Average Cost per Room to Build |
|---|
| Motel | $75,000 |
| 3-Star | $221,000 |
| 4-Star | $318,200 |
| 5-Star | $604,200 |
Costs of Building a Motel per Room
The average cost per room to build a motel is around $75,000. Motels do not typically have many amenities, and the rooms are entered from outdoors, eliminating shared indoor areas. This means that if the motel has the same number of rooms as a better hotel, its construction costs are lower.
Costs of Building a 3-Star Hotel per Room
On averate, the cost to construct a 3-star hotel per room is of $221,000. Three-star hotels may have amenities and features for guests, but these are optional and vary by hotel. This is considered a standard-quality hotel with good quality but not luxurious features. There may be amenities like gyms and restaurants but not always.
Cost of Building a 4-Star Hotel per Room
The cost per room to build a 4-star hotel is around $318,200 on average. In a 4-star hotel, many of the features that were considered optional for a 3-star hotel are now standard. This includes restaurants, gyms, pools, spas, and communal areas. The materials used are usually of higher quality as well.
Cost of Building a 5-Star Hotel per Room
Five-star hotels have an average cost to build per room of around $604,200. They have many of the same features as a 4-star hotel, but they may have more of them or better quality. In addition, 5-star hotels often include additional services for their guests than a 4-star hotel may. The rooms are usually much larger, so the hotel may have fewer rooms in the same square footage.
Specialty Hotel Construction Costs
In addition to regular motels and hotels, several hotels also cater to specific needs or other purposes. Some of these fall in with the “luxury” line of 5-star hotels, but others have their specific costs:
| Hotel Type | Average Cost per Sq.Ft. |
|---|
| Guest House | $100 - $500 |
| Boutique Hotel | $190 - $550 |
| Casino | $300 - $550 |
| Resort | $300 - $550 |
Average Price to Build a Guest House
With Airbnb and the trend of catering toward travel, guest houses are becoming a more common phenomenon. For the average backyard guest house, costs start at $100 per square foot. For a luxury guest house meant for more people, costs go as high as $500 a square foot. A guest house is anything from a small house located on your property for friends and family to a bed-and-breakfast style inn with boutique amenities. Because of this, there is a wide range of associated costs.
Cost to Build a Boutique Hotel
Boutique have a full range of features and a wide range of costs from $190 to $550 a square foot, depending on the area and features included. These hotels tend to be smaller than most hotels, and they are designed to cater to guests in very specific ways. Someone may opt to stay at a boutique hotel because of a theme or a specific amenity that you cannot find elsewhere, such as a hotel that caters to pets.
Cost to Build a Casino
The cost to build a casino ranges between $300 and $550 per square foot, depending on the area. Casinos are considered luxury hotels and resorts in most areas. The idea is to encourage guests to spend money so that the business profits. To this end, the casino's hotel portion is generally 5 stars, with many features and amenities and several restaurants and types of entertainment.
Cost to Build a Resort
Resorts are usually considered a destination stay. Depending on the area, they cost between $300 and $550 per square foot to build. Resorts usually offer relaxation and recreation to its visitors, making them a place where people take a vacation. For this reason, they are usually classified as luxury or boutique and are generally 5-star facilities with many services and features included.
Hotel Construction Cost Breakdown
Every hotel is different in size, scale, number of rooms, land, and construction material. For this reason, your exact costs and percentages vary. However, it is possible to break down the various elements of building the hotel into percentages and categories that you can use to determine where your budget is going for this project:
| Breakdown | Percent of Total Project Cost |
|---|
| Opening Expenses | 3% |
| Furniture and Fixtures | 9% |
| Land | 10% - 21% |
| Soft Costs (Non-Construction Fees) | 12% |
| Hard Costs (Material, Construction) | 55% - 66% |
Land Costs
Land costs are usually included in the total cost to build. This includes both the purchase of the land and any work that must be done before development. This may include any existing buildings and their rework or tear down as well. Generally, land costs are 10% to 21% of the total project cost.
Hard Costs
Hard costs are construction-related expenses. These may include building or refurbishing an existing building. This includes both the material and the labor needed to construct and finish the site. Hard costs include the finish materials, such as flooring and drywall, and basic construction materials like concrete and steel. Because this group includes a range of materials and encompasses both new builds and refurbishment of existing properties, the cost is 55% to 66%.
Soft Costs
Soft costs are non-construction-based fees. This includes the architect and interior designer fees, draftsman, structural engineers, and other things like maintenance, insurance, permits, taxes, and other related costs to building that are not a specific material or visible in the finished build. Soft costs average out to around 12% of your total budget.
Furniture, Fixtures, and Equipment
Your hotel is not complete unless it is furnished and ready for operation. So, in addition to the hard costs of building, you also need to factor in the furnishings and fixtures, such as beds, tables, reception desks, restaurant and kitchen equipment, lights, sinks, plumbing, and furnishings like sheets, pillows, and towels that all hotels need to function. This portion of your budget should be around 9% of the total costs.
Opening Expenses
Also included in the total budget should be everything you need to open and run the hotel. This includes inventory, supplies, marketing, staffing, and technical services like utilities. This is an important part of the total budget and should not be overlooked. It usually runs to around 3% of the total project costs.
Labor Breakdown
It is common to work with a hotel builder or contractor specializing in this type of commercial build. Builders and contractors may charge up to $150 to $250 an hour for their services. In addition, you will likely need the services of the following professionals:
Hotel Room Size Requirements
There are very few actual requirements when it comes to the size of a hotel room. The average size of a hotel room in the U.S. for a standard hotel is around 330 sq.ft. However, it is possible to have luxury hotel rooms that are over 1,000 sq.ft. in size, and new trends in micro hotels have rooms that are less than 150 sq.ft. in size.
The only requirements refer to ADA-accessible hotel rooms. These rooms need to have hallways and doorways that are a minimum of 32-inches wide inside the room and 36-inches wide outside of the room. There must be a minimum of 30 inches around each bed and turning radiuses of 60 inches in bathrooms and other small spaces.
Beyond this, there are no requirements for making a hotel room a specific size or layout.
How Much Does it Cost to Build a Marriott Hotel?
Marriotts are a specific hotel franchise, which has set franchise fees and setup costs. The average cost to open a Marriott is between $7,000,000 and $10,000,000. This includes an initial franchise fee of $600,000 or $500 per room, whichever is greater.
Cost to Run a Hotel
The cost to run a hotel varies, depending on many factors like the hotel size, number of staff and employees, number of guests at any given time, what services the hotel includes, and level of service. A 5-star hotel costs more to run than a 3-star.
With that said, you can estimate the percentages of your total revenue per room occupied that go into operation. Remember, these may not be the total expenses for your hotel because you may have restaurants, spas, and other amenities that change these figures.
- Rooms payroll - 18.89%
- Rooms expenses - 15.5%
- Overhead payroll - 10.18%
- Overhead expenses - 13.23%
- Energy costs - 5.61%
- Owner expenses - 28.44%
- Cash flow - 8.15%
How Long Does it Take to Build a Hotel
Hotels are a serious undertaking to build. From the first designs to the final finishes before opening, most hotels have a timeline of 2½ to 3 years to build. This assumes traditional construction. If you choose to use a modular build, it is roughly 20% to 30% faster, about 6 to 9 months faster, than traditional building.
Enhancements and Improvement Costs
Cost to Build a Restaurant
Most 4 and 5-star hotels and some 3-star hotels include at least one restaurant in their plan, so their costs are typically higher. Building a restaurant onto an existing hotel costs around $150 to $750 a square foot, depending on the establishment’s level of quality.
Car Service
Some hotels include car service, including pick up and drop off from airports and other transportation. Some even provide rides within a certain radius. Adding a car service starts at $50,000 and goes up, depending on the number and make of cars.
Cost to Add a Spa
Many 4 and 5-star hotels also include spas on their premises, which is accounted for in their plan and overall costs. BigHospitality recommends carrying out market analysis before installing a spa into your hotel to try to get your investment back.When added to some 3-star hotels the average cost is $500,000.
Additional Considerations and Costs
- Comfort. While the hotel’s appearance is important, it is also crucial to make sure that your hotel is comfortable, warm, and convenient. This is particularly true of boutique hotels because many people choose them for their homey atmosphere.
- Location. Pay attention to the location of your hotel. Not only does it impact building costs, but it also impacts success. Make sure that there are not too many competitors so that your hotel does well.
- External factors. Many external factors influence how well your hotel does. These include trends in domestic travel, consumer spending, consumer confidence in the industry, and international guests. These trends change over time, so it is good to keep them in mind and leave room to adjust.
- Renovation. In addition to building a hotel, it is possible to also purchase and renovate an older or existing hotel. Franchise hotels are also available, usually at lower costs. Each project has its own set of total costs, influenced by location and the type of hotel you are building. Speak to a hotel builder or architect to get a better idea of these costs.
FAQs
- How big is the average hotel room?
Hotel rooms come in all sizes, with the average being around 330 sq.ft.
- How much does the average hotel cost per night?
Many factors influence the cost of a hotel room per night. The average range is $50 - $200.
- How much electricity does a hotel room use?
Expect your energy costs to make up 5% of the hotel’s expenditure budget.
- How much does it cost to furnish a hotel room?
Furnishings make up roughly 9% of the hotel’s budget.
- How much does it cost to make a 5-star hotel?
The average cost of a 100-room 5-star hotel is over $60,000,000.
- What is the largest hotel chain in the world?
Marriott is the largest hotel chain in the world.
- How profitable is owning a hotel?
This is a very variable amount because hotel types, sizes, and services vary, and with them, so does the profit. Expect profits to make up roughly 36.95% of a room’s occupancy costs.
Updated:
