9 biggest challenges of creating a new hotel during COVID
Multiple lockdowns, construction bans, supply issues, labour and staff shortages... How has Sydney’s newest luxury boutique hotel, Aiden Darling Harbour coped and continued building during COVID? Nicolas Chen reveals the realities of what has been an unusually trying time for a first-time hotel owner.
While the global pandemic has left its mark on many, operators in the travel, hospitality and construction sectors in Australia have been some of the hardest hit these past 18 months.
So it stands to reason that a project converging all three of these industries would be one of the toughest to see through: something which Nicolas Chen can attest to first-hand, having been in the driving seat of building a new hotel - a testing undertaking in even the best of times - since before COVID began.
Nicolas’ first foray into hotel ownership has been as bumpy a ride as you could ever expect. (And for those who have been involved in a hotel opening, you’ll know that even the smoothest of rides are still a rollercoaster.)
Together with his father Frank, a seasoned property developer, Nicolas purchased a 1930s Art Deco commercial building in Sydney’s Pyrmont back in 2006. Given their shared love and history of extensive travel, the two came up with the idea of repurposing the building into a boutique tech-led hotel of tomorrow, made for travellers by travellers.
COVID KNOCK-ON
Work on this project officially began three years ago in 2018 when Nicolas quit his career as a real estate lawyer and partner in one of the world’s largest law firms to focus one hundred percent of his time on bringing his hotel vision to life.
Pre-Covid, the build was destined to take 18 months with an open date slated for Q2 2021. Ground was broken and construction started in October 2019.
Building a hotel of the future, when the future suddenly becomes so unclear, has thrown up many obstacles...
Since then, the project has seen more than its weight in challenges and delays. The initial timeline has stretched beyond recognition, and all these months later, a definite open date remains a moving target until the current and most debilitating pandemic lockdown in NSW lifts.
Building a hotel of the future, when the future suddenly becomes so unclear, has thrown up many obstacles for the 88-room hotel build. From construction stoppages, lengthy delays in deliveries and redesigns, to price hikes, staff shortages and wave after wave of booking cancellations, Nicolas has seen it all.
“COVID knocks you down again and again. And it doesn’t just throw a spanner into the works, it knocks you for six,” says Nicolas.
He shares some of the more challenging and enduring obstacles faced so far.
TOP 9 CHALLENGES
1. Delivery delays
"Deliveries and freight have taken a lot longer than expected, especially when coming from overseas. No doubt other hoteliers have noticed this with hotel supplies, and it has been no different for building materials and construction supplies. Some of our deliveries have even taken upwards of eight months to arrive, requiring prophetic levels of planning."
2. Shortage in skilled workers
"With border closures, trades and labour workers have been in very short supply. This is an issue which continues to spread across the hospitality sector generally, and construction work has been especially susceptible to the labour shortage."
3. Price hikes
"Prices have naturally increased due to the shortage of supplies and labour, pushing costs of construction well over budget."
4. Construction stoppage in lockdown
"When construction was forced to stop, unfortunately it wasn’t as simple as shutting the site one day and reopening the doors again once permitted. There were significant knock-on effects. The site had to be demobilised, secured and made weatherproof. Tools were removed to discourage break-ins and theft, and any vehicles and equipment were returned if loaned. Hire costs of cranes, scaffolding and other site facilities still continued. When the site was permitted to open again, workers had to re-mobilise and get tools back to the site, deliveries rearranged, permits (which were for the lockdown period) reapplied and repaid for, and arrangements made for workers to legally be able to return to work. All in all, it’s about as atypical and volatile as a construction program can get. (At the time of writing, many workers are still stuck in LGAs of concern and can’t return to work on site.)"
5. Valuation changes
"Hotel valuation methodology is generally based on stabilised operational income, and uncertain economic conditions and difficult trading conditions can cause values to drop significantly. This is a significant risk with financiers as any drop in value may cause a breach of financial covenants. Hence we have noticed some DAs for property developments have been amended for a different use – hotels and student accommodation being changed to residential, serviced apartment or boarding house developments. We made the call to press on as we still believe in the project and what we have to offer, and know we can make it work despite the challenges."
6. Uncertainty of business upon opening
"Being unable to predict when we can actually open has required a bit of a leap of faith to just push on. Will we be lucky and open when life has come back to normal? Or will we open and have to close again because cases reappear? We have had to put a lot of contingency plans in place and I’ve lost count of how many times we’ve pivoted our strategies. Having said that, in the event of another pandemic or world event affecting travel, we at least have done some of the hard thinking to help adapt nimbly."
7. Hotel redesign
"Rapidly changing customer demands due to COVID can necessitate a rethinking of spaces already finalised. For example, demand for better air filtration and purification technology places greater spatial, technological and energy demands on a building; the need for smaller seating capacities requires a repurposing of restaurant and bar areas; designs now need to allow spaces for sanitiser stations; higher spec air-conditioning filters and air purification systems need to be considered and installed if feasible; deep cleaning equipment such as foggers now need to be purchased. Redesigns have knock-on effects to the cost and budget, and construction programs, especially if planning approvals are required for such changes."
8. Staffing issues
"The uncertainty and delays have made the pre-opening hiring process even more difficult, on top of the hospitality skills shortage. You don’t want to overhire, but at the same time you need to snap up the best people possible in the circumstances. Operationally, management staff who have been brought on prior to opening have to be kept engaged and where the target opening keeps moving, it can have a demoralising effect."
9. Booking cancellations
"Never an easy task having to cancel bookings. Although we have found guests have been very understanding of any changes to their bookings due to delays, given the COVID uncertainties everyone is faced with."
WHAT'S NEXT?
Despite a long list of challenges, Nicolas has always been focused on the end goal of opening a well-designed hotel with a thoughtful approach to the guest experience, and has found plenty of upsides and learnings in the process.
“One benefit has been connecting with those rare vendors who understand the position you’re in and genuinely want to help. They clearly want a long-term, ongoing relationship, and don’t take advantage of you, which will serve us well into the future,” says Nicolas.
Nicolas says he’s found leaning on the experts has been crucial to navigating through these difficult times.
“Working with consultants who have hotel expertise and experience really does make a difference. Otherwise you risk ending up with a hotel that does not appear as well thought out as it could be,” he says.
"We’ve always been driven by the light at the end of the tunnel..."
“I’ve always believed that you can’t always control what happens to you and around you, and the universe just does its own thing. But you can absolutely control how you react to it and what you do. And the best thing you can do in such circumstances is to take an analytical, problem solving approach to give you answers and direction.”
While he can’t pinpoint what the first few weeks and months will look like for Aiden Darling Harbour, Nicolas remains positive and energised about the future of the hotel and the broader industry.
“We’ve always been driven by the light at the end of the tunnel and an intense belief in what we wanted to achieve, and that has always given everything meaning,” Nicolas says.
“Yes, there are numerous times we wished we didn’t have to deal with certain things, but the bigger picture has kept us going.”
This article first appeared on LinkedIn here.
Aiden Darling Harbour is a boutique hotel thoughtfully-designed for the traveller of today, fusing convenience and style together across 88 compact rooms with hand painted wall murals, and a combined lobby, bar and café, in a 1930s Art Deco building in Sydney’s harbourside Pyrmont village.
45 Murray Street, Pyrmont, NSW 2009
www.aidendarlingharbour.com.au
IG @aidendarlingharbour
FB @aidendarlingharbour