Tuesday, September 3, 2019

Why Did Marriott Use Modules from Poland for NYC’s AC Hotel?

I’ve been asked why would Marriott and other chains buy their modular hotels from Poland.

How could modules built in Poland, transported to the Polish docks, loaded on cargo ships to cross the Atlantic, arrive at the docks in NYC be more economical than building them in a factory on the East Coast and trucking them there?

A bit of a complicated answer. First, Marriott is already buying lots of hotel modules from factories on the East Coast and second, East Coast factories that can build enough modules to keep up with Marriott, Hilton and other hotel chain’s demand are in short supply.

Marriott has said they would like to have 25% of all of their new hotels built using modular construction.

When you realize that just a few short years ago, hotel chains were not using modular construction and today one chain is looking at 25% being modular, that is a heck of an increase.

Now take a look at all those new East Coast factories popping up everywhere you look and you wonder why they had to go to Poland for their hotel.

Oh! Sorry! I meant to say, look at the lack of new modular home factories popping up in the East.

It seems like every day we read about a new modular factory opening to serve the West Coast and Rockies as well as new factories in England to meet that country’s demand for modular.

Yet the East Coast, the birthplace of modular, seems content to try to max out production in factories built 40 years ago leaving little room on the production line for other projects and single family homes.

Some East Coast factories are ill-equipped to meet the demand of Marriott and Hilton, the growing demand for affordable housing or huge townhouse projects.

I’ve heard rumors for the last year or two about many new modular factories coming to the Mid-Atlantic and New England regions but so far there has been little to show for it.

Let’s hope those rumors come to fruition soon or we will find ourselves forced to buy homes from the West Coast, England and even Japan and China as the market for off-site modular construction will drastically increase over the next 5 years.

Gary Fleisher is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant. modcoach@gmail.com


Tom Hardiman said...

The reason Marriott shipped in modules from Poland is very simple - no one here was interested in building for them. Or at least not interested enough to meet Marriott's requirements.

Marriott and other hotel developers now know that using modular construction will get their hotels open 3-8 months sooner (Marriott's figure). So if they have to drop an extra million on transportation to generate an extra $7 million in revenue from early occupancy, I think the answer becomes clear.

Jonathan Davidson said...

Dear Tom and Gary,

Tom's comment that one could or was willing to build the units is incorrect. The developer was looking at an alternative during the Atlantic yard debacle. Unfortunately the two projects built with Polcom - the hotel and the pod project both had serious but correctable issues. Unfortunately corrections cost time, money and aggravation. As some of us know Polcom was sold and we will have to wait and see if more projects come to NYC. I have had talks with both architects and am currently working on projects with them both. Before we through out theories and keep blaming the industry we should fact check.

Henry Mickleburgh said...

Well Gary, I'll answer that for you. Marriott, are the franchise. The Marriott AC on 6th Avenue, this project, the world's tallest volumetric modular hotel, is an AC Branded hotel. Skystone is the GC and Marriott approved modular manufacturer.

These modules are an amalgamation of three Polish (EU) factories, all under Skystone's control, IP and we own the accreditations. The largest modular, by order value, "chunk" is the Marriott prescribed FF&E, which comes from everywhere!

So, in this instance, the hotel owner is 'buying' a Marriott AC Branded Hotel from Skystone LLC, New York. Hopefully, this allays any xenophobia. Aside from this, shipping a module from Poland to NY costs the same as 400 US trucking miles.

Tom Hardiman said...

I was not blaming the industry. When I asked Marriott the same question, that was the answer I received. Valid reasons why a manufacturer may not want to focus on hospitality market including being very busy with other clients. My point is that many hotel developers are now sold on modular and will find fabricators willing to work for them - within our outside the US.

Unknown said...

Oh....just have some patience. We are working on it! Meanwhile check out the robotic welding cells being brought online by Z-Modular to be used in assembling #vectorbloc chassis! Perhaps some hotels in the pipeline?

Anonymous said...

Another reason some of the east coast modular companies are not willing to build for Marriott is that they are wanting to tie up your production line for only their projects. They also want you to have a separate building to store and install their furniture. Years ago when the modular companies were begging to build these hotels Marriott wouldn't even entertain talking with us. Most modular companies are loyal to their existing customers an are not willing to jeopardize those relationships.

Unknown said...

First, it is wrong to say that Marriott decided to purchase from overseas resources. This project is being done by a franchisee. While Marriott is supportive of the modular approach, the franchisee is deciding.

There is no current US manufacturer doing hi rise modular. It’s like asking an automotive manufacturer to stop their vehicle construction to make one heavy duty truck . There is no reason to leave your current market for one that has limited potential.

Why Poland? If you look at who is being successful in the EU, it is the Eastern European Countries. Poland, Slovakia and Hungary are all experiencing around 4% GDP growth. Eastern Europe does not suffer from the overblown social programs and regulations of the west nor the immigration challenges. While Poland is in the EU, it has its own currency.

I have both purchased product from Europe going back over 30 years ago and built in over 20 countries. Never discount the value of currencies and how your money is taxed when looking at solutions.

If you are an entrepreneur is Eastern Europe looking to expand, your gaze is the West. Both Western Europe and the US become targets. When you have no business, you look at all business opportunities. Like being a young toddler, everything goes in your mouth with no discrimination. Some lessons get learned during this stage of life and I suspect the same with the business involved. It is not a mature market yet.