INTELLIGENT OFFSITE GUIDE TO EVALUATING BATHROOM PODS

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2 A Guide to Evaluating the Cost of Bathroom Pods A factory is a better place to make a bathroom than a construction site. It is warm and dry, there is plenty of space and the conditions offer the opportunity to fine-tune the assembly process. This means a bathroom produced in a factory setting will have fewer defects, and pod manufacturers are able to research and implement aesthetic or functional innovations and ways of improving quality. There is also the potential for cost savings. A bathroom accounts for approximately a quarter of the floor area within a typical hotel room or student residence, has the highest level of required facilities and services for such a space, and requires at least five different trades for traditional construction. For these reasons hotel chains and residential developers have in the past opted for the use of bathroom pods in order reduce costs, increase health and safety and decrease project timescale as well as increase standardization and quality of finishes. Bathrooms make an ideal candidate for prefabrication, being relatively small and selfcontained units. Furthermore, sanitary and services provision is expensive. Bathrooms account for approximately 8-10% of the capital cost of a hotel or residential development construction budget, but a far higher percentage of site management time, schedule delays and defect-list problems are rarely accounted for. Using bathroom Pods lowers construction costs by reducing construction time, improving quality, and eliminating the bathroom defects list. With traditional building, a multitude of trades need to be organized to realize the bathroom design. This requires a high degree of supervision and management on site to ensure correct sequencing and quality of work from plumbers, electricians, tilers, floor layers, sealant applicators, decorators, glaziers, carpenters and other specialists. Modular bathrooms or bathroom pods do away with most of these issues and although the capital cost may not be less than site-constructed bathrooms, savings from waste and improved quality result in less snagging and better performance in use. More significantly, reduced construction times mean earlier income streams from the property. Many general contractors who use bathroom pods put the cost of managing the defects list at 500 per bathroom on a traditional build. Many of the trades involved will require more than one visit and separate works to complete the defects list. The defect list can be particularly challenging for site management in both the interface co-ordination of the trades and when undertaking the defect list and defect correction works.

3 How much do bathroom Pods cost compared to site-built? There is no such thing as a standard bathroom pod; what you specify is what you get. In financial terms, hotel and residential bathrooms have a high level of capital costs associated with them due to the mechanical, electrical and architectural specification for finishes, fixtures and fittings. Any efficiency of design, manufacture and installation can result in a notable reduction in the overall out-turn cost of the project. In addition to the overall incorporated capital costs, traditionally built bathrooms require an intensive level of management and logistical planning. Unlike other spaces within a hotel or residential development, bathrooms require a significantly higher level of trade interaction when compared to other elements of the building. Bathroom Pods will cost about the same as site-built bathrooms on a direct cost basis. This alone is a significant value because bathroom pods are built to a much higher level of quality than can be achieved in site built construction. For example, pod manufacturers do tanking on their walls and floors as a standard, very little consideration is given to that method in traditional construction. It is also easier to renovate in the future. The tile is set with an adhesive that is impervious to water and prevents tiles from coming loose over time. The blocking is far superior to site built and prevents loose curtain rods and grab bars. The caulk joints tend to be much thinner than site-built, and the ceilings have a smooth finish, allowing for an easier clean and the prevention of mould growth. When you compare the cost of bathroom pods to site-built construction, it is important to make sure that you get an accurate estimate of what site-built bathrooms actually cost. Our experience from working with many customers is that there are five key aspects to calculating your site-built costs. Compare Like for Like The number one problem we see when customers estimate the cost of site-building a bathroom is that they fail to include all the materials in the bathroom. The pod manufacturer help by providing a detailed list of all the materials included in the bathroom. If you receive an estimate from a general contractor it will help to use this breakout to make sure they ve included all the right materials.

4 Include Installed Costs Not Just Material Costs It is very important to ensure that your cost estimate includes the cost of installation. For example, a granite vanity cost must include the cost of freight, blocking, handling, and installation, as well as the cost of templating which happens on most traditional builds, not just the cost for the purchased granite itself. The pod manufacturer helps you calculate this cost by providing an estimate for the installed cost of each component. An example for a typical small, select service hotel bathroom is included for your reference. In addition, the general contractor s fee for general conditions for the site-built bathrooms must also be included to provide a true comparison. Use a Correct Scope of Work for Installation Costs As industry leading consultants, we understand what it takes to install and hook-up bathroom pods. Therefore, we can provide guidance for your sub-contractors such as plumbers and electricians so they can give you a fair price to install the connections to the bathrooms. Often we see that just a little education on the part of the plumber and electrician results in a more accurate bid for installation. Beware of Artificially Low Costs Because we know most all of the major hotel brands bathrooms specifications we understand exactly what goes into each bathroom and how much it costs. Sometimes we speak to general contractors that estimate costs actually below the costs of the materials alone. In this case it is necessary to revisit these estimates and we are happy to speak with you or your general contractor to clarify discrepancies. Credits won t work! Trying to have your general contractor bid the project as site-built construction and then provide credits for the bathroom pods is almost always an ineffective exercise, which results in higher than necessary costs for the owner. Few subcontractors will provide a full credit for any reduction in their scope of work so it makes no sense to head down this path when you know the outcome. The best approach is to make an informed decision up front before going out to bid. Then you

5 can incorporate the bathroom pod specifications into the bid documents and evaluate the cost per room, as you normally would do with site-built construction. This is a fairly straightforward proposition and only requires a correct scope of work for the major trades involved in the connection to the bathroom. Having multiple subcontractors bid installation ensures that sub-contractors provide a more competitive number than if asked to provide credits. If your project has already been bid and you are seeking credits, we have seen customers have success with this by having the work re-bid with the revised scope of work to at least two bidders. The pod manufacturer helps this process by providing the architect with the information to properly communicate the scope of work for each trade. Many customers prefer to have a bid set of documents that clearly removes the bathroom from the scope of work. What is my return on investment for using bathroom pods? 1. Time Savings It is not unusual for bathroom pods to enable a reduction in schedule of several months time. To be conservative we have included the costs savings from saving only six weeks site times. In most cases it will probably be more than this. Faster construction also reduces construction loan interest, less general conditions, and more profit from an earlier opening. Also, many owners need to open by a specific date so they can maximize revenue. In Europe, The Middle East, and Africa, the use of bathroom pods for IHG (Holiday Inn brands, Crowne Plaza etc.) contributed to a construction program reduction from 48 weeks to 26 weeks for a typical 80 bedroom hotel. 2. Defect-list Savings Many clients tell us that over half of the job defect-list is due to bathroom construction issues. It is not uncommon for defect lists to require tens of thousands of Euros to correct. Poor tile work, damaged walls and ceilings, chipped tubs, poor blocking, and damaged doors are just some of the problems we hear about. For the sake of being conservative we have assumed that each bathroom costs 500 to correct the defect-list, which is based purely on management time alone. This is the time taken to manage the sub-contractors to clear their defects in each bathroom.

6 3. Overhead Savings Building bathrooms on-site requires the general contractor to coordinate five specialty trades, each of which is dependent upon the other to do their jobs. You also have the it was not me scenario when it comes to damage. Eliminating all this time and effort helps site supervisors become much more effective at managing the construction process. Bathroom pods also reduce the amount of site rubbish and waste, electricity, material handling equipment, and other resources that must be used to support the site. Using bathroom pods also cuts preopening room cleaning. For this analysis we have only included the reduction in rubbish removal to provide a conservative estimate. Other elements to consider are: Centralized Control Purchasing for the lead contractor is simplified with one contractor Buying a number of trades and materials from one source reduces procurement resource time and effort resulting in cost savings Sustainability Factory manufacturing is inherently less wasteful than traditional forms of construction and thus more sustainable, specifically; Recent life cycle analysis has demonstrated that off-site construction methods reduce the overall impact on the environment by at least 40% Fewer deliveries to site, meaning less noise, dust and disruption Less construction disruption Work on-site is safer, quieter and cleaner Potentially up to 90% fewer vehicle movements on-site, which assists with less disruption around the sensitive worksite Lower waste to landfill reducing on-site waste removal and disposal costs Factory waste material is typically less than 1.5% compared with 7%+ on a traditional construction site and recycling of waste is more reliably controlled in a factory environment than it is on-site Factory operatives are up to 250% more efficient than the same activity carried out on-site

7 CASE EXAMPLE To better understand these concepts let s take a look at an actual example. For the purposes of this example we are using data from a 125 room select service hotel. This bathroom is a typical 50 square-feet or 4.5 Sq. metre bathroom that includes a tile floor and walls, Bathtub and shower, toilet, and granite vanity with basin. Hotel Brand 4 Star Hotel Bathroom Quantity 125 Location Europe Construction Budget 12,500,000 Amt. Budget Financed 7,500,000 Project Duration (Mos.) 12 Interest Rate on Loan 8.0% Rev Par 125 Hotel Operating Profit % 20% Defect-list Cost Per Unit 500 Typical Site Built Costs Cost Category Installed Price Framing & Gypsum 965 Accessories 700 Door & Frame 650 Millwork/Joinery 1000 Plumbing 2,110 Electrical 1000 Tile, Granite, Surround 2,100 Paint 600 HVAC 600 Site Cost 9,625

8 COST SAVINGS USING PODS Per Bathroom Site Built Bathroom Cost 9,625 Total Project Bathroom pod Price 9,325 Installation 300 Installed Cost 9,625 1,203,125 Difference to Site-Built $0 $0 Savings 6 weeks Loan Interest savings ,000 6 weeks General Conditions ,525 6 weeks Hotel Operating Profit ,000 Elimination of Bathroom defect list ,500 Reduction in Trash Removal Expense 40 5,000 Total Savings 2, ,025 % Savings to site-built 26%

9 Conclusion Bathroom pods cost about the same as site built bathrooms on a direct cost basis but can result in 26% savings due to faster construction and reduced defects-list. How much is it really worth to have all your bathrooms in perfect condition at the end of the construction project? How much of your time and delays are associated with the headaches of going back and fixing problems later? Finally, how do your customers really feel about one of the most important areas impacting their satisfaction? Large caulk joints, loose fixtures, sloppy tile work, scratched mirrors and poor paint jobs don t make a good impression and we all see it in virtually every new bathroom in which we visit. The maintenance burden for a prefabricated bathroom will be less, than a similar site-fabricated version. The key to this is to plan for easy access to the services. Many on site bathrooms are constructed in such a way that access to basin or bath traps is virtually impossible after installation and the same goes for the toilet pan stack waste. These areas should always be accessible for the client to maintain. Bathroom pod manufacturers consider this to be standard good practice. Due to the make-up of the pods it should be possible to detect and remedy any leak before the underlying structure is affected. EUROPEAN BATHROOM POD REPORT 2015 NOW AVAILABLE. We recently purchased the European Bathroom Pod Industry Report compiled by Intelligent Offsite. The report was extremely well compiled and contained very valuable statistics, contact details and background information about the industry in general, as well as individual Pod manufacturers. The report has saved us considerable time researching this growing market" Angela Arundel Export Manager Roman Showers info@intelligentoffsite.com for more information on this exclusive report.

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