Everyone checks the roof. Almost nobody forensically assesses the furniture – which is a shame, because that’s where the money is.
Design due diligence is a check, before you buy a hotel, of how its interiors were actually built rather than how they look: how the furniture is fixed, whether the services can be reached, what the materials really are and what records exist. On a 150-room hotel, the answers can move the cost of the next refurbishment by more than £1 million.
When an investor buys a hotel, the due diligence is forensic across almost every aspect of the business: Trading figures, operational risks, management contracts. Surveyors climb onto the roof, peer into the plant room and m
Then someone walks into a guest room, looks at the furniture and decides whether it seems acceptable for the market or need replacing. One of the most predictable long-term cost in the whole building gets judged in roughly the time it takes to boil a kettle, and on looks alone.
The question almost nobody asks is the one that matters: how was this put together, and what will it cost to take apart? The answer affects the value of the asset at every stage; buying, owning and selling, and it is usually missing from a process.
Design due diligence is a short, focused assessment of a hotel’s interiors and fit-out, carried out by an experienced designer before you commit. In practice it means a day walking the property; opening wardrobes, looking behind headboards, lifting access panels and engaging with the team on the ground.
What is design due diligence?
A report is drafted covering construction quality, how much life is left in the fit-out, and the likely cost of the next refurbishment under a few different scenarios. It sits alongside the building survey, not instead of it.
What comes out of this process should affect the price you pay, the budget for the hold and the exit. It is part of the pre-acquisition advice and feasibility work we do for hotel investors and owners.
What we look at on the walk-round
Most of these can be answered in an afternoon, with a torch and a screwdriver and members of the current team who know the building.
- When was the last refurbishment, and what kind was it? A full strip-out five years ago tells you the next one, perhaps two or three years away, will probably need the same, at a similar cost. A refurbishment that kept and refreshed the key pieces tells you somebody was thinking.
- How is it fixed? Screws and bolts, or glue and bonding? That single observation tells you more about the cost of the next refurbishment than any financial model. On a 150-room hotel, the difference between those two routes can easily exceed £1 million at a single refurbishment.
- Can you reach the services? Can the electrics be reached without dismantling the furniture built around them? Can the plumbing be maintained without breaking tiles? Is the distribution board fixed inside a wardrobe? If the services are entombed in the decoration, every regulation change and every leak becomes an expensive event.
- What is it made of, not just what is it finished in? A scratched wardrobe over a sound steel frame and hardwood shelves looks tired but can be brought back for a fraction of the cost of a new one. A flawless surface over chipboard and plastic brackets may look fine today but has no residual value at all. It becomes waste the day it stops looking acceptable.
- What paperwork comes with it? Specifications, assembly drawings, supplier details, maintenance records, material passports. A building that comes with its records hands the next owner knowledge. One without hands them a guessing game – and when contractors have to guess, they guess skip.
A few South West extras
Many of the hotels we walk in the South West are on the coast, in listed buildings, or both, and each adds its own questions. By the sea, check the metalwork and the fixings. Salt air dissolves zinc-plated screws and chews through finishes, and a balustrade that would last fifteen years untroubled in London may need refinishing after five on the Devon coast.
In a listed building, find out how the services thread through the historic fabric and what consents future changes will need, because both affect the cost and timing of every refurbishment that follows. We’ve written more about both in Designing Hotels for the Devon Coastline and Converting a Listed Building into a Hotel.
Plenty of hotels in the region are independently owned, and when one changes hands, the building’s history tends to leave with the previous owner. Where the paperwork is thin, the walk-round matters even more.
The Basel lesson: impatient money is your friend
About twenty years ago, long before Sibley Grove, I was working at a design studio hired to transform two business hotels, one in Basel and one in Zurich. They had been bought by American investors who planned to upgrade them and sell them on. We did what designers do. Mood boards, the trends of the day and new everything – a blank canvas, beautifully presented.
The investors flew over for the presentation, and within five minutes they were fuming. Picture someone with a great deal of capital, very little time and more than a passing resemblance to a cast member of The Sopranos. ‘What the **** is this?’ he asked. ‘Why are you wasting my money?’ I’d love to tell you I saw the light that day. Mostly I saw the door.
We were sent away to start again. The headboards were kept, but reclad and extended to look grander. The services stayed where they were. The bathroom fittings stayed, apart from the vanities, and the bathrooms were over-tiled to avoid the cost of stripping them out. Some furniture was replaced and some was kept.
Their motives were entirely commercial, but the result was lower capital expenditure, far less waste and work for local trades. It took me several years to recognise that the cheapest answer had also been the greenest one.
The lesson has stuck. An investor who wants the best return on every pound over a five-year hold isn’t a natural ally of longevity, but he isn’t its enemy either. Point that impatience in the right direction and it becomes an argument for keeping what works, spending only where it changes the result, and handing the next buyer a building that is cheaper to refurbish. You don’t need investors to care about carbon. You only need them to want their money back.
What it changes: the price, the hold and the exit
The price. If the next refurbishment is going to be a demolition job, that is a cost you can see coming and price in. Design due diligence turns a vague worry about ‘tired rooms’ into numbers you can negotiate with.
The hold. A well-built fit-out costs less to look after. Materials suited to their setting resist damage, and furniture designed for repair is fixed quickly, so rooms stay on sale rather than out of order. On one of our West London hotels, a guest decided an oak wardrobe shelf was the ideal bottle opener and took a sizeable chunk out of the front. Trust me, hotel guests do extraordinary things. Because the shelf was screwed in rather than glued, it was simply flipped, the room stayed on sale and the damaged shelf was repaired a couple of days later.
The exit. A hotel that presents well, comes with its records and can show a lower cost for its next refurbishment is a less risky purchase. A buyer who can forecast their own spending with confidence doesn’t need to knock as much off the price to cover the unknowns. Many investors buy intending to sell within five to seven years, so the quality of the fit-out is something you will be selling on, too.
A trading model tells you what a hotel is worth today. Design due diligence tells you what it will cost to own.
Frequently asked questions
What is design due diligence for a hotel?
Design due diligence is a pre-acquisition assessment of a hotel’s interiors and fit-out: how the furniture and joinery are built and fixed, whether services can be reached, what the materials are and what records exist. Sibley Grove usually carries it out in a day on site, followed by a short report estimating the cost of the next refurbishment.
How much difference can it make?
On a 150-room hotel, the gap between a fit-out that can be refurbished and one that has to be replaced can exceed £1 million at a single refurbishment. On some assets it is the difference between a £5 million and a £12 million project.
What is the quickest way to judge a hotel’s fit-out?
Open a wardrobe and look behind a headboard. Screws and bolts mean pieces can be taken out, refinished and reused; glue and bonding usually mean demolition and replacement.
Is design due diligence the same as a building survey?
No. A building survey covers the structure, roof and mechanical and electrical systems. Design due diligence covers the interiors and fit-out – furniture construction, finishes, access to services and documentation – which are what drive the cost of refurbishment.
Do you carry out design due diligence in Devon, Cornwall and the wider South West?
Yes. Sibley Grove is based at Dartington Hall near Totnes in Devon and works across the South West, the rest of the UK and internationally. Coastal and listed hotels get extra checks, including corrosion of fixings and finishes in salt air and how services run through historic fabric.
