With an assembly system vaguely resembling a game of Tetris, modular construction is anything but a puzzle to purveyors of the style. It’s a solution both builders and hoteliers recognize as faster, cheaper, even greener than traditional construction methods.
Designed and built indoors in a controlled and protected environment, away from the vagaries of the weather, the self-contained units — complete with walls, floor and ceiling, as well as fixtures, fittings and furnishings — are then transported and stacked at the construction site. It’s not a new process — the U.S. is ahead of the local market by a few years, Europe by 20 years — but modular hotels are only now gaining traction in Canada, across all brands and locales.
TOWN AND COUNTRY
“Marriott, Hilton, Hyatt, Travelodge, Comfort Inn — they’re all doing it,” says Jim Dunn, president and founder of Calgary-based Stack Modular, which has been in the pre-fab field for more than a decade. Before hotels, he explains, the format began in much humbler circumstances: it originally filled the need for workforce housing in isolated areas. “Getting crews of concrete workers or drywallers out to a remote location is difficult and costly,” he says.
Now this method is solving the same problem for hotels. Days Inn Sioux Lookout, located about 350 km northwest of Thunder Bay, Ont., took 13 months to construct, as opposed to an estimated two-and-a-half years for a traditional build in this location, says David Blades, vice-president of Operations for Toronto-based Realstar Hospitality, which holds the master-franchise rights for the Days Inn brand in Canada. “It was an opportunity to get into a remote area where traditional ‘stick builds’ would have been expensive, mainly due to the harsh climate and limited labour force,” he says of the property, which opened in December 2014.
But modular isn’t restricted to rural locales. “We’re building a hotel in downtown L.A., which is the antithesis of rural,” says Dunn. “And with minimal impact to the area, unlike on-site construction, which often disrupts traffic with road closures and detours for months.”
ECONOMIES OF SCALE
Modular units are built using the same materials and to the same codes as traditional construction, but for less money. How much less? It depends, says Dunn, whose Shanghai factory uses Chinese labour and high-grade structural steel at a cost significantly less than if used and built in Canada.
“If you’re building a two-storey motel out of wood, it may not save you that much money. A 10-storey hotel [using steel], however, will be upwards of 25-per-cent cheaper, and [completed] a year sooner — maybe even sooner…depending on the building’s location. So, for example, a [conventionally constructed] 10-storey building in Vancouver would be a two-year build. We’ll come in at eight to 10 months.”
Gilbert Trudeau, owner and CEO of Quebec’s RCM Modulaire — which uses wood for its modular units — says the savings are all in the planning. “Any delays in the schedule are 100-per-cent dependent on the coordination. With pre-fab construction, the upfront work is critical to the process. So, if you plan correctly, we can shave six months off the production from a conventional job. If the building is planned, designed, engineered, et cetera, the production process in the factory can take six weeks.”
As for cost savings, Trudeau takes a different tack than Dunn. “I’ve never told a client it will be less expensive,” he says. “I’ve always said that we’re going to be the same or better. The idea is to save time and increase quality. In a factory, you’ll get that precision over and over again. Could we save money? Yes, but I wouldn’t go as far as to say that we’re going to be cheaper than a conventional building. That’s not what we sell.”
Stuart Laurie, director, Franchise Sales and Development for InterContinental Hotels Group (IHG), which recently opened its first Canadian modular hotel — the 119-room Holiday Inn Express & Suites Gatineau-Ottawa — agrees modular is not necessarily cheaper. “We found that there’s not a big difference in cost,” he says of Holiday Inn’s six-month modular build. “[The location] determines the end cost, because transportation is a variable in modular. They build the modular, store it on site until the hotel is ready to start stacking, then transport the modular to the site and start stacking the building. When I talk about costs of construction, I’m usually talking about hard costs, as well as furniture, fixtures and equipment. I don’t usually talk about soft costs or land because they vary across any region.”
However, he does concede that, “If you can get the hotel open sooner, you’re reducing your carrying costs, whether it’s construction financing or any other fees. The faster you can get a hotel built and open, the faster you start making money.”
Carrie Russell, senior managing partner with hotel valuation and appraisal firm HVS, says, “Proximity to the modular plants makes a significant difference in cost of transport.” She notes the markets that benefit most overall from modular are those that have a short construction season and high cost due to labour availability.
Indeed, as Blades says, “We’re able to have brand presence in markets that traditionally would be a challenge to get into.”
A MATTER OF MATERIAL
Dunn says steel construction allows for a building of up to 25 storeys — a height not attainable with wood, which usually is restricted to six stories or less. “We would love to get into only selling above six storeys because no one else can do it but us,” he says. “There’s no other steel-modular providers [but] us, because we build in China. I wouldn’t defend wood because wood, by definition, is an organism that rots, warps and molds. And wood on the back of the [transport] truck could potentially take in water.”
Trudeau has a differing opinion. “Wood is a great product. It’s soundproof, it’s energy efficient, it’s green. If maintained, a wood building will last as long as any conventional building. I own a building that’s stone and wood, built in the 1600s.”
Even so, Trudeau, who is also a partner in the modular-built Holiday Inn Express & Suites Gatineau-Ottawa, is considering entering the steel game (the Holiday Inn’s ground floor used a steel frame for a sturdier foundation) within the next year so he can hit the 12-storey mark.
In addition to speed and cost savings, there are other benefits to modular construction, including built-in soundproofing by virtue of the unique design. “In modular, you have a wall, air space and another wall,” says Trudeau. “And when you put another box beside it, you get a double wall. In conventional construction, you basically have a floor and then they stack a wall on top of it, so you have one wall.”
Another benefit — because modular units are built inside a factory, extraneous environmental waste is near nil. “The amount of waste that concrete construction [unleashes on] our environment rivals oil and gas,” says Dunn. “Leftover drywall lying around…30 per cent is thrown away because, after cutting, they’re left with little pieces [that are useless].” Inside a factory, waste is reduced by protecting and recycling materials.
Extra modules can also be integrated into existing buildings to accommodate expansion and growth. Or they can be disassembled and removed for upgrading, or relocated for other uses, reducing the need for additional raw materials while minimizing the energy and supplies necessary to create a new building.
Additionally, with about 80 per cent of the construction taking place in a controlled environment, overall safety of the workers and security of the materials is increased.
A YEN FOR UNIFORMITY
“[Hotel owners] love when each room is exactly the same, not just in a particular hotel but across their brand,” says Dunn. “So if you buy from a single supplier of modules, suddenly Room 301 is the same in Nanaimo, Terrace, Edmonton and Saskatoon. Hotels strive for that.”
That’s not to say there isn’t room for creative design and decorative touches. “You can change the outside skin: [use] brick, vinyl siding, hardwood, paint colour — we can do whatever exterior the client wants,” says Trudeau. As for the look of a modular, he says, “I could show you five to 10 buildings I’ve built and you could not tell the difference. There’s no visible difference if it’s designed correctly.”
Laurie says the same of the Holiday Inn Express. “I stayed in the hotel and I didn’t notice a difference. I can’t imagine a guest would, because we are our own biggest critics. There was no difference in terms of curb appeal, or from a guestroom experience. If I were to notice anything, it would probably be the quality of construction or the finishes and it’s a really nice hotel.”
In fact, modular allows designers to replicate an existing hotel’s look and style so any new additions are indistinguishable from the original.
CHALLENGES AND LIMITATIONS
With all its benefits and advantages, modular construction is not without its limitations. Finding experienced architects and contractors; financing; and transportation costs are all challenges the format faces.
“If we’re going to do a hotel in Edmonton, we need an architect in Edmonton. Or, if we’re going to do a hotel in Victoria, we need an architect in Victoria,” says Dunn. “Well, there are no experienced architects in this field. You need to bring them from outside or you teach them. We look for a small- to medium-sized firm that has an appetite for innovation — especially [those] run by the millennial generation who are thinking outside the box. But it has been a problem finding those soft-cost firms, architects and engineers.”
That challenge was mitigated last September when Mississauga, Ont.-based Bird Construction Inc. acquired 50 per cent of Stack, giving them access to designers and manufacturers they didn’t have before. “Now I can say to Marriott, for instance, that I can get a modular hotel built, installed, occupied and the keys handed over in eight months.” Dunn notes the industry is also constrained because of the reluctance and regulations of Canadian financial institutions. “I would say they’re the biggest issue as far as barrier to entry. Regulations are typically the first to kibosh a project.”
He explains that Canadian banks prefer a traditionally built hotel because, if the builder defaults, they take the land. But, if you tell them “the hotel is going to be built 5,000 km away and you need 40 to 50 per cent of the entire project value up front before anything gets to site, their heads spin. But smaller institutions, which need to be innovative, are looking to modular to [help them] do that.”
“As more developers and brands understand the benefits of this type of construction, I would expect that we will see more of these projects as developers refine the process to take advantage of the speed of construction and consistency of the product,” says Russell. Trudeau agrees that as the process gets more streamlined and owners realize how much faster they can have their hotels up and running, modular will secure its place in the industry. “It just makes a lot of sense for a hotel,” he says. “The chains are seeing it now. The quality of the hotels they’re getting is positive and we’re getting referrals, which was not necessarily the case five years ago.”
Dunn estimates modular construction represents just two per cent of all construction in North America and had hoped to raise that to five per cent by 2020. “But we realize that’s not going to happen,” he says, since we’re already half-way through 2018. “In 20 years, if there’s a conversation where developers realize they have three options — wood, concrete or steel — even if we’re just in the preliminary conversation, we’ve won.”
Written by: Robin Roberts