Rising Challenge - There's more than one way to hold down construction costs

10/01/2005

Anyone who has been involved in a resort construction project over the past two years knows the story: Rising costs are playing havoc with budgets. Prices for drywall, cement, steel, and asphalt have all soared 20 to 40 percent. Repairs from the 2004 hurricane season have caused shortages in roofing and other materials. And a tight market for skilled labor has meant no relief on that side, either. "Prices have been rising at an unprecedented rate since the beginning of 2004," says Mike Jensen, principal of Cumming LLC, a construction project management firm with hospitality clients around the world. "We've never seen a spike like this."

Because vacation areas such as Las Vegas and central and south Florida are experiencing a boom in both residential and commercial projects, resort developers have been particularly hard hit. Perhaps the only bright spot for the vacation ownership industry is that the high costs have meant an open door for timeshare and fractional developers to partner on projects. "To obtain financing, the high-end hotels need to add a timeshare or fractional component," says Tom Davis, senior vice president for architecture and construction at Marriott Vacation Club International and Ritz-Carlton. "The more expensive projects just don't pencil out without it."

What's the best way to cope with rising costs? Here, two experts share their approaches one traditional, the other less so. Davis has more than 20 years of experience in resort construction, including hotels and timeshare projects for Hilton. Jeff Forrest is chief operating officer of Winter Park Construction Co., which has built resorts for Hilton Grand Vacations Co., Bluegreen Corp., and Tempus Resorts.

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