Ernst & Young's Hospitality Group Offers Construction Advisory Service - Lodging Pros Help Owners Mitigate Risk Factors and Streamline Process

Nowhere in the industry is this process more apparent than in new construction, as financial markets have turned a wary eye towards new hotel development and owners attempt to tighten the reins on projects currently in the pipeline or on the drawing board.

In response to this growing trend, Ernst & Young LLP's Hospitality Services Group has expanded its Construction Advisory Service, designed to help lower costs by mitigating the various risk factors associated with new lodging development for both large chains and individual owner/operators alike. The announcement of the unique service was made by M. Chase Burritt, National Director of the Hospitality Services Group, the largest and most comprehensive lodging advisory practice in the US.

Through the Construction Advisory team, Ernst & Young's Hospitality Services Group helps clients identify potential cost savings, maintain crucial scheduling, and insure each project meets the owner's objectives in terms of both quality and operation. Services include business process management; cost management and control, cost segregation, development for fee, litigation support, organizational design; project cost audits; project management oversight; project and process reviews; strategic planning; and turnaround and workouts.

Under the direction of the National Director of Operations and Construction Services, John L. Heffron, the Construction Advisory Service practice consists of more than 80 full-time specialists nationwide, including architects, engineers, project managers, project control engineers and accountants who are skilled at assisting clients in optimizing their construction projects and minimizing the risks of cost and schedule overruns.

"Hotel owners and operators are in the business of hospitality, and they're very good at what they do. They're not necessarily good at the business of construction and managing capital projects, particularly those companies that have managed small jobs and then have a large one," said Heffron. "There are huge differences in the controls necessary to accurately monitor and control the process, as well as the time commitments to do so. Oftentimes this is not a core area of competency for the owner. Ernst & Young deals with all kinds of construction projects day in and day out from an owner's perspective. We help insure they get what they pay for and that their goals and targets are realistic. Prior to construction, it's critically important that owners do adequate planning up front, rather than acting quickly, and that they have the right team in place to execute their plans."

The best time to bring the Construction Advisory Service on board is right when the light bulb goes off that says "We need to expand or build," according to Heffron. Ernst & Young can help put the entire program in place, utilizing the full capabilities of its Real Estate Practice, including site location, feasibility studies, financing, operations and construction.

Ernst & Young's Hospitality Services Group is currently serving as internal construction auditor for an international hotel chain that is in the middle of a billion dollar multi-property renovation program. "They felt they didn't have the core competency within their own internal audit group to adequately evaluate all aspects of these major construction projects - each in the $20 million to $100 million range," said Heffron. "We essentially are providing project monitoring and control assessments. We reviewed their appropriations approval process to make sure it had adequate checks and balances and that it was complied with. In the project execution stage, we evaluate the project delivery system; examine how they qualify and contract for team members for planning, design and construction; evaluate what controls they have in place to manage those phases of the work and how well they have managed."

The Construction Advisory team also looks at specific operational and financial controls, such as methodologies used for budgeting and estimating; updating budgets; project scheduling methodology; commitment reporting (what was spent); change order management and cost forecasting procedures; subcontractor controls for competitive bidding; insurance tracking procedures aimed at making sure all policies are in place and don't lapse, and that proper lien waivers have been filed. The team also reviews work authorizations and accounting functions of the owner and construction manager to help make sure that the reporting is accurate and timely; tracks all job cost/budget revisions and change orders; and finally, assists with ongoing forecasts of cost to complete and estimates of time to completion.

With over 50 dedicated advisory professionals, Ernst & Young's Hospitality Services Group is the largest hospitality practice among the Big Five accounting firms, offering a full scope of integrated, multi-disciplinary services - including help with acquisition, development, operations and disposition - for every major segment from lodging to travel, tourism to attractions.

Ernst & Young's Hospitality Services Group maintains a dominant market position in such major markets as California, Phoenix, Dallas, Atlanta, Philadelphia, Chicago, Boston, New York, and Miami. It also has extensive international experience in Latin America and the Caribbean, Europe, the Far East, and Pacific Rim.