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Hotel Management Beware: The Last Man Standing Could Be the Loser
During the life of a hotel building, certain triggers can potentially put hotel management at greater risk than they would be otherwise. Events like major rehab work, a storm event, lease renewals, change in management contract, or sale of ownership usually require some sort of extensive evaluation, such as due diligence or a building evaluation by a consultant or series of consultants. These kinds of trigger occurrences lead to an increased risk that any underlying problematic issues (such as mold or moisture) will become known, possibly causing the existing hotel management significant and unplanned costs.
Hotel management firms have the unenviable task of juggling multiple competing interests. Working in a performance-
If such a problem is discovered, it often becomes the hotel management firm’s job to maintain and contain the issue in such a way as to defer addressing the root cause, which can often be traced back to a design or construction flaw. By putting off remediation, however, the manager is in reality ensuring that at some point in the future, when a trigger event takes place, the problem will come to the surface. By then, it will likely have escalated to the point that it is now much more severe and costly than if it had been resolved initially. In such situations, profitability is usually impacted dramatically and immediately.
Liberty Vice President George DuBose explained that the average building age of a prolific generation of hotels in the United States is currently 25 or 30 years.
“This means the statute of limitations for original designers and contractors is long gone,” he said. “As a result, the last recourse for hotel ownership seeking recovery of funds ends up being the hotel management firm and their liability insurance – even if the root problem actually originated with a fundamental design or construction flaw. Ultimately, hotel management firms will be held responsible if they haven’t taken steps to protect themselves.”
There are ways for hotel management firms to manage their risk and limit exposure of existing problems to hotel ownership groups, DuBose stated.
For example, Liberty recently assisted in the sale of a 3-star hotel in which the buyer was seeking a 7-figure discount because of mold and moisture issues that had been uncovered – but were clearly a long- term problem in the hotel. Liberty’s assessment showed that the discount should instead be in the low 6-figure range. Ultimately, the lender and the original ownership group both took discounts in order for the sale to be completed.
Additionally, Liberty provided an assessment and remediation plan for a 4-star hotel so that an interested buyer could go through with the prospective sale, confident that the mold and moisture problem had been resolved.
If you suspect your hotel may have an underlying mold or moisture-related problem and if you anticipate a transition in management or sale of ownership in the near future, it's in your best interest to contact a building forensics firm like Liberty to have them provide an assessment or remediation plan that helps minimize your risk and exposure.
A recognized leader in helping clients design and construct complex, sustainable green buildings, Liberty proactively addresses possible failures of those same projects. Our philosophy is that proactive problem avoidance is always the best approach. The Liberty staff has a combined 200 years of experience in solving construction and design deficiencies, including over 30 years consulting with Walt Disney Corporation on more than 500 highly complex construction projects worldwide.
Internationally, the firm brings the expertise and knowledge of over 1,000 projects (across the United States, Canada, and the Caribbean, as well as in Europe and Asia) to meet your needs in commercial properties. Liberty’s clients have successfully built over $20B in construction as a result of our problem avoidance peer reviews. We have assisted clients in recovering over $500 million through our proven ability to understand and apportion complex moisture-related insurance claims and then to effectively communicate our findings to a judge or jury. Visit us at www.libertybuilding.com.