Even Hospitality is Going Modular

Modular buildings are not a new phenomenon – interest in prefabrication dates as far back as 1935 when Sears Roebuck and Co. announced that it would build and ship fully assembled homes, a touch more sophisticated than its “Modern Homes” catalog version (Emmet, 1965). Prefabricated building manufacturing is stimulated by real estate cycles when labor markets tighten and the costs of building materials rise. As builders and developers start to feel the crunch, they begin to consider streamlining the construction process, and in nearly all asset classes, modular construction promises efficiency and speed over building on-site.

Modular units of the Fairfield Inn and Suites being assembled, Folsom, CA. (Image Courtesy: Paul Dille, Guerdon Modular Buildings)

The modular construction industry has traditionally been largely limited to single family housing, and indeed the residential sector has seen a renewed interest in modular construction, particularly with the nascent concept of modular multi-family. However, more recently commercial developers have employed this construction approach in the hospitality industry. In 2017, Marriott opened the doors to its first modular hotel in Folsom, California, developed in collaboration with Guerdon Modular Building located in Boise, Idaho.  The building is comprised of 97 guest rooms and contains nearly all the amenities today’s business traveler expects from the Fairfield Inn and Suites line of mid-scale hotels, including en suite bathrooms, public assembly areas, and breakfast and reception lounges in the main entryway.

The concept of prefabricated hotels is attractive to developers for several reasons.  First, with the cost of construction on the rise in all parts of the country, builders are struggling to provide attractive returns for investors. While the cost of labor and materials using prefabricated construction techniques is comparable to those of units that are built on site, the much shorter construction timeline and risk-control offered by off-site factory building tips the scale.

Interior detail and finishes of a modular guestroom, Fairfield Inn and Suites, Folsom, CA. (Image Courtesy: Marriott Rewards)

Second, modular units built in a factory setting are less subject to environmental and site conditions than traditional construction techniques, and the majority of the structure can be built concurrently with site work and the installation of the foundation slab.  This is particularly useful where weather is a major risk factor and can cause costly unforeseen delays in construction timelines. While a traditional hotel like the one built in Folsom would take anywhere from six months to over two years to complete, one built modularly in Guerdon’s Boise factory can reduce the schedule by three to six months, with much less opportunity for schedule overruns (Furbay, 2017). It also allows a central facility for receiving and storing raw materials that can be normalized for suppliers, further reducing uncertainty. End users are also seeing the benefit of system-built hospitality.  The nature of assembly line production allows for a consistency of product that, especially for business travelers, is increasingly important in the highly diversified market of flags and sub-brands, and the reduced cost of capital and commodified building approach gives operators more flexibility in setting rates.

Third, the demographics of mid-scale and economy hotel users is changing as well, and operators are searching for ways to regain market share from the highly flexible nature of the sharing economy. One-off operators offering accommodations through Airbnb and HomeAway can offer superior internet connectivity, for example, and undercut the major players like Marriott and Hilton. Modular hotels are able to address this issue of connectivity and integrated “smart” features much more easily because they become a central facet of the pods’ infrastructure – smart features are literally built into the walls, floor and fixtures (Fabris, 2018).

However, one important consideration of hotels built using modular construction is that they are still unable to compete with the luxury class of product. For now, hotels constructed modularly are limited to economy and select-service brands as certain design characteristics limit their size and flexibility. Luxury and boutique hotels still have the edge with special features, large conference and assembly areas and more plentiful room and suite layouts. With the ever-increasing flow of capital into manufacturing research and development with respect to system-building, it may be only a matter of time before these typologies chip away at that market.  For now, the Fairfield Inn at Folsom is the first of many mid-scale projects planned for Marriott and the trend is likely to continue for the foreseeable future.

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Emmet, B., & Jeuck, J. E. (1965). Catalogues and counters: A history of Sears, Roebuck and Comp. Chicago: Univ. Press.

Fabris, Peter (2018). “6 Trends shaping smart hotels”. Building Design and Construction, www.bdcnetwork.com

Furbay, S. (2017). Modular Construction: An Evolution in the Development of Modern Hotels. HVS Global Hospitality Report, 14–18.

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