The biggest risks hotel owners underestimate

Hotel development is expensive, complex, and unforgiving. Most owners know that going in but there’s a difference between knowing a project is risky and understanding where the real risks actually sit. The risks that cause the most damage are rarely the ones owners spend the most time worrying about.

Having worked across the hospitality ecosystem — from operations and asset management to owner representation, consulting, and now project advisory — one thing becomes very clear: successful hotel projects are rarely the result of one stakeholder alone. They depend on alignment between owners, operators, designers, consultants, and execution teams from the earliest stages.

A design that’s too ambitious

Many hotel projects are set up to fail before opening day because the product was wrong for the market from the start.

Owners are often guided by the operator’s brand standards and their own ambitions when defining what to build. The result is an area programme that looks impressive on paper but has no real grounding in local market demand or financial return. A large room count, extensive F&B, spa, meeting facilities are all very impressive but a financial drain unless there’s demand for it.

Hotel brands naturally approach projects through the lens of guest experience, brand positioning, and long-term brand consistency. Owners, meanwhile, must balance those aspirations against investment return, market depth, and capital efficiency. Those priorities are aligned in many areas, but not always completely.

That’s what a proper feasibility study is for. Not a high-level assessment that confirms what you already want to hear, but a grounded analysis of the demand drivers, the competitive set, the realistic achievable rates translated into a product brief and an area programme that can actually work within your budget.

When the area programme is right, everything downstream gets easier. Your capex is more predictable. Your operator conversations are more balanced. And your project has a realistic path to profitability, not just a ribbon-cutting.

Getting this wrong at the start is expensive. The cost of a feasibility study is trivial compared to the cost of building the wrong hotel.

An overly optimistic capex

One of the most common issues we see is owners starting projects with budgets that are simply too optimistic. Not because anyone is careless, but because many early-stage estimates are developed at a conceptual level using benchmarks and assumptions before detailed design and execution realities are fully understood.

At the feasibility stage, numbers often look manageable. But as design develops and projects move closer to execution, the real costs begin to emerge: material escalation, evolving operator requirements, coordination gaps, specification upgrades, contractor pricing realities, infrastructure requirements, and market volatility.

When the actual capex begins to diverge from the original estimate, owners are forced into difficult decisions: reduce scope, inject additional capital, delay timelines, or proceed while absorbing increasing financial pressure. None of these options are ideal.

At that stage, every stakeholder is protecting a different priority. Architects are understandably focused on preserving design integrity. Operators are focused on maintaining brand standards and operational functionality. Contractors are pricing real-time market conditions. Ultimately, however, the commercial risk sits with the owner.

Getting an independent budget review from teams with actual hospitality execution experience before major commitments are locked in allows owners to make better-informed decisions much earlier in the process.

Choosing the cheapest PM

Project management is sometimes evaluated primarily on fee competitiveness rather than delivery capability. Unfortunately, the difference between project management firms can be substantial, particularly in hospitality.

There is a meaningful gap between a PM who manages information and one who manages outcomes. A generalist PM firm handling multiple asset classes brings a very different approach from one deeply specialised in hotels and hospitality assets.

Similarly, there is a difference between lean teams multitasking across design coordination, procurement, cost management, and site execution versus firms that bring specialised expertise across each function with proper depth and hospitality understanding.

The impact of that difference often only becomes visible later in quality, coordination, procurement efficiency, timeline control, claims management, operational readiness, and ultimately in the final project cost itself.

A lower PM fee may appear attractive early on, but the downstream implications of weak coordination, delayed decisions, rework, or poor procurement can easily outweigh any initial savings.

Delaying decisions

“Time is money” is one of the most overused phrases in construction, but the mechanics behind it are very real.

When design decisions are delayed, contractors continue billing. When approvals slow down, financing costs continue accumulating. When specifications change after procurement has started, costs multiply quickly.

Many owners underestimate how significantly their own responsiveness influences project timelines and overall cost efficiency.

A strong PM team should create structure around decision-making, highlight consequences early, and help owners navigate choices quickly and confidently. But ultimately, the pace of a project often reflects the pace of its decision-making ecosystem, including the owner.

The earlier governance structures, approval frameworks, and responsibilities are clearly defined, the smoother projects tend to move.

Treating operator requirements as non-negotiable

Hotel operators establish brand standards for valid reasons. Those standards protect guest experience, operational consistency, and long-term brand positioning, all of which are important to the success of the hotel.

At the same time, operators are naturally more focused on operational functionality and brand integrity than on optimising development capex. This can create situations where owners feel caught between maintaining standards and managing investment efficiency.

Operational inputs and evolving brand requirements can also emerge during the design process, sometimes with significant cost implications if not addressed early enough.

The key is not to resist operator input, but to approach these discussions with preparation, market understanding, and hospitality-specific technical expertise / market studies. Experienced advisors can often help identify alternatives that protect the operational intent of the brand while still improving commercial efficiency for the owner.

The best outcomes usually come from collaboration rather than confrontation.

Equating cost reporting to cost management

There are many firms that will tell you what your project costs. Far fewer will actively work to control those costs.

The difference matters. Reporting tells you where you are. Management changes where you end up.

Real cost management means challenging design decisions before they get built in. It means running value engineering with enough seniority and expertise to actually get approvals. It means managing your procurement process to find alternate specifications that meet operator standards at lower cost. And it means doing all of this from the start, not when you’re already over budget.

If the role is limited to tracking and reporting costs without influencing procurement strategy, scope optimisation, coordination, or decision-making, then it is simply cost reporting rather than true cost management.

Accepting your HMA without question

Hotel Management Agreements are highly sophisticated documents shaped over decades of negotiations and operational experience across thousands of hotel deals worldwide. Naturally, most agreements are structured primarily from the operator’s perspective.

The challenge is that many owners enter HMA negotiations without fully understanding the long-term commercial implications of what they are signing.

Legal counsel plays a critical role in reviewing contractual protections and legal exposure. However, understanding how specific operating clauses impact future returns, owner flexibility, capital planning, operational control, and exit strategy requires specialised hospitality experience as well.

We have seen situations where hotels performed operationally, but the ownership structure or commercial terms limited the owner’s ability to fully benefit from that success.

An experienced owner’s representative or hospitality advisor brings two valuable perspectives to this process. First, a strong understanding of prevailing market practice — what is standard, what is negotiable, and where operators typically have flexibility. Second, a delivery perspective. We understand how contractual obligations eventually translate into built area, technical requirements, procurement implications, construction cost, and timelines during execution.

How Ascentis can help

With over 140 hotel projects delivered across 17 countries, hotels are not just one of the asset types we build, hotels are our core focus. And unlike a relay race of specialists who each inherit someone else’s decisions; we stay with our clients from the first feasibility conversation through to handover. That continuity matters more than most owners realise. One team that knows the full history of a project, every cost decision, every operator negotiation, every value engineering trade-off, will always respond faster and more effectively when problems arise than a consultant who joined at construction stage and does not have a full grasp of your market, needs, and priorities. It is also what makes our advisory genuinely independent: we have no incentive to tell you what you want to hear at feasibility, because we will be the ones managing the consequences of a bad decision twelve months later.

None of these risks are inevitable. The starting point is always the same: get good advice before you commit. Not after you’ve signed the land deal, not once the operator is selected, but before. An independent feasibility assessment, a proper project execution plan, and a clear view of realistic capex will tell you more about the viability of your project than any other step you can take.

Get in touch with Ascentis to learn more about how we can deliver your project while safeguarding your investment.