Modular Hotel Concept Could Ride Demand's Ebb and Flow - Business Travel News

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Modular Hotel Concept Could Ride Demand's Ebb and Flow

February 15, 2013 - 10:45 AM ET

By Michael B. Baker

Wherever oil, natural gas or other essential resources can be extracted from the earth, hotel demand is certain to follow. That creates headaches for travel buyers who suddenly must procure lodging in a hotbed that one year earlier may have been a one-stoplight town, and hoteliers are unable to effectively capitalize on the boom. Developers, after all, are not exactly keen on spending millions of dollars to build a hotel in a rural area that easily could be sleepy again within a decade.

In a few months, hotel investment company Banyan Investment Group will debut its own solution to this challenge in one of the United States' most lodging-strapped rural regions: North Dakota. The Shut Eye Hotel in Alexander, set for an April 1 opening, was designed to "look and feel like any other branded, upper-end select-service hotel," according to Banyan chief investment officer Andy Chopra. But there is one exception: This hotel will take a few months, not years, to build.

Banyan partnered with Proteus On-Demand, a Georgia-based company that specializes in temporary real estate projects, to design and build the hotel. Individual rooms are built off-site and then assembled into a hotel on location. They are sturdy enough to be stacked in multi-story arrangements and connected with a roof system and atrium, a must for brutal North Dakota winters, said Proteus On-Demand CEO Theo Den Bieman.

Such construction projects already are fairly common in Europe, particularly in space-constrained areas, but are relatively new to the United States, Bieman said. Although Americans initially might equate "modular hotel" with "trailer park," Bieman pointed out that luxury cruise cabins are built the same way.

"Rooms built for a cruise ship are much more pleasant and elegant than a trailer," he said. "This also creates enormous flexibility to specific demands. We could use modular units to create a studio-type hotel, as opposed to traditional rooms."

Chopra described Alexander's 70-room Shut Eye Hotel as a "mini-Embassy Suites."

"[Rooms] open up into a climate-controlled atrium area," he said. "There's complimentary breakfast, wireless Internet, flat-panel televisions—the experience you're used to in a select-service hotel."

Securing corporate contracts is one of the company's goals, Chopra said, and Shut Eye already has fielded calls from local corporations looking to strike room deals. He added that he intends to keep occupancy split about evenly between transient and extended-stay guests. While extended-stay demand is tremendous in North Dakota—enough to completely fill the hotel—keeping a balance will help the company maximize revenues, Chopra said.

Although many developers were skeptical of the modular concept, they began to warm to it when Banyan presented at last month's Americas Lodging Investment Summit in Los Angeles. Since then, Chopra said the company has been approached by groups facing similar demand situations in Texas, Alberta and as far away as mining camps in Malaysia.

Such projects could meet temporary hotel demand scenarios besides boomtowns, including major citywide events or disaster relief efforts, Bieman said. The modular hotels do not require traditional utility hookups and can run on generator power and bladder bags for water.

They also require no foundation, which cuts building costs by about half, Chopra said, and also minimizes the environmental impact. When demand subsides, the hotel can leave with it, leaving little trace behind.

"North Dakota has seen the effects of two previous oil booms, and those have not necessarily been pleasant experiences," Bieman said. "It's a sensitive issue with the local people, and we consider ourselves guests of them as well. Even if this lasts 30 years, it's very important that we are able to move on if necessary and return everything as we found it."

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