NEWH - Fall 2019 - 4

GUEST PERSPECTIVE

The Modular Revolution
DAVID J. GOLLIN, PH.D.
Innovation and Strategic Marketing Professional

David J. Gollin

he combination of offsite construction-both panelized and volumetric-and the
implementation of advanced technologies is driving the construction industry
into the 21st century. The 2017 McKinsey Global Institute report, Reinventing
Construction, reveals why. Since 1945, productivity in the construction industry has barely
increased, while agriculture and manufacturing productivity has grown by 1,500 percent. In
other words, construction is still done the way it was more than 74 years ago-though several
players are aiming to change that.
This stagnant productivity rate and the $1.3 trillion size of the U.S. construction market
make construction ripe for disruption. Companies like Katerra, founded by Silicon Valley
venture capitalists, are leading this revolutionary change. Since 2015, it has raised $1 billion
and has a project pipeline valued at over $3.7 billion, with three factories in the U.S. and
two more in India-one of which produces hotel room pods. Katerra is continuing its rapid
expansion, and in the next few years plans to build three new factories to serve the Eastern U.S.
In 2018, Jennifer Lund, senior director of global design, and David Walsh, senior director
of project management Americas for Marriott International, were the co-leads of Marriott's
modular program. In a presentation at the 2018 World of Modular conference, they reviewed
Marriott's perspective on permanent modular (volumetric) construction (PMC). They stated
that Marriott's goal for 2019 was that 40 percent of its hotels are built using PMC. Marriott
has contracted with a variety of companies, including Guerdon Modular Buildings, which
produces modules incorporating two suites and the hallway, and includes all FF&E. Guerdon
recently completed a 354-suite dual-branded property for Marriott in Hawthorne, California,
which opened 14 months from the placement of the first module.
Marriott is certainly not the only company pursuing PMC. InterContinental Hotel Group
and Hilton, as well as some independent hotels, have also utilized its advantages. One Hilton
project manager told me that he loves the quality of modularly constructed hotels-because
of the double walls, ceilings, and floors, guestrooms are very quiet. Also, he said a big part of
the modular advantage is that all FF&E is factory installed, so guest suites remain sealed until
just before opening, when the staff inspects and adds loose amenities like towels, toiletries,
and sheets. Having all FF&E installed at a modular factory and waiting to open rooms
eliminates the risk of elements being damaged during installation.
So why PMC? The quality of the final product is one advantage. Double walls, floors, and
ceilings result in a quiet room. The other main advantage is time to market. An average
focused-service hotel can open nine months early, resulting in nine months of revenue that,
if the hotel were site-built, would not be realized. Currently, the cost of a modular hotel is
similar to a site-built hotel. However, in its June 2019 report, Modular Construction: From
Projects to Products, McKinsey & Company projected that as the modular market matures,
the time to construct a modular building will be reduced by 20 to 50 percent relative to sitebuilt, and the cost will decline by 20 percent. The bottom line: Modular is here to stay.
In addition to being employed in the construction industry, David is a freelance writer.
His career began as a scientist. After completing his graduate training in biochemistry
and molecular biology at the University of Georgia, he moved to sales and marketing
positions. In 2015, David transitioned to the construction industry where he leverages
his skills in strategic marketing to gain an understanding of the radical changes that are
beginning to transform our industry. ❙❘❚

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NEWH - Fall 2019

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