Root Causes of New Hotel Opening Delays in Greater China
3 new 150+ room hotels will open in China every day for the next 25 years!
That would assume a whole lot of project managers to manage the delivery of the assets and operations. It would benefit of a well defined efficient and effective set of (project management) processes. However, the reality as we learned is different.
The context in which this is taking place is fascinating. An unprecedented growth that differs from the US and other markets in rate and characteristics as it are mainly greenfield projects instead of acquisitions. Major players are looking to multiply their room inventory within the next years. Although all the signs are there that those new hotel openings are actual a project, hotel management companies often do not approach it that way. Projects lack dedicated project teams and the way it is managed is closer to a business as usual approach than a structured project management approach. Even if there was an approach to use dedicated teams, there is a severe shortage of qualified resources. All together, a very immature market with regards to the understanding of project management.
Delivery of a new hotel involves 2 key stakeholders namely the owner of the building and the operator of the hotel. Interests are not always communicated nor aligned. This can create issues like the builder thinks they can still be building a week before opening. A General Manager, normally a line manager is parachuted in and ends up covering PM tasks. As we know, business and usual are two different things requiring different approaches. Their background however is making sure there is food on the table and clean sheets on the beds in clean rooms. This is a different approach than building new capabilities on time from the ground up.
Basic fundamentals like project briefs, business cases and risk management are missing or poorly practiced. Lacking an understanding of Project Management processes leads to some of the next consequences:
- incremental pre-opening expenses
- revenue disruptions
- opportunity costs
- tied up corporate resources
- reputation damage
Gert Noordzy did an interesting analyses between perceived causes of delays and actual root causes. Some perceived causes would be in the spheres of "Hotel design & construction 38%", "hotel owner 24%", "Hotel Operator 10%", "Pre Opening activities" and last procurement 4%.
The full report is available for download here.
The real underlying root causes are summarised as:
-Project Investment Motivation
-Lack of a project management culture
-Management Company _modus operandi_
Interesting observation that none of the root causes was mentioned in the interviews. The responses through interviews were merely symptoms.
The next 5 building blocks were recommended to improve performance:
- Technical Components: Project Management Methodology - Project Management Standards
- Fundamental Components: Culture - Organisation - Education
Although not rocket science (Project Management is used in many industries) a lot of work is to be done!