A great hotel plan comes together

26th September, 2017

Modular construction has proved a winning formula for building projects in UK.

When China's CIMC Modular Building Systems completed the construction of the 220-room Holiday Inn Express in Manchester in only 39 weeks, it made history as the first large-scale modular building of its kind in northwest England.

Not only was the project quick and cost-effective, its construction method of stacking together large segments to build the hotel's foundation also attracted great interest in the Manchester area, as residents could watch a large crane stacking them on site.

The project isn't a one-off. Rather, it represents a development in cutting-edge modular construction, a trend Chinese companies are pushing forward in the UK after achieving tremendous success with the technology at home.

"In addition to cost advantages, modular construction also provides certainty, quality and reduced risks," says Michael Crane, design director of CIMC MBS.

"The two largest risks in construction are how to get a project out of the ground and how to keep it watertight during construction. Modular units, transported in shipping containers, are guaranteed to be watertight," Crane says.

According to Crane's estimates, modular construction provides cost savings of around 25 to 30 percent over conventional construction methods through reductions in capital costs, time and on-site costs.

So far, CIMC MBS has worked on more than 10 projects in the UK, mainly building standard modular units for hotel rooms at its China factory and then shipping them to construction sites. Clients include InterContinental Hotels Group, Accor and Hilton. Its first project was the Travelodge hotel in London's Uxbridge, completed in 2008, followed by the construction of a Premier Innat Gatwick Airport, completed in 2009.

Its work has so far received great feedback from clients. Peter de la Perrelle, managing director of Tower Hotel Management, which will be operating the Holiday Inn Express in Manchester, says that, while the novel approach is marginally cheaper than traditional methods, the real benefit is that the hotel can be built quickly.

"With traditional methods, it takes about 18 months. We are on schedule for a 41-week build. So, you're bringing your product to market a lot quicker and can start earning money on the investment sooner than you would with normal methods," de la Perrelle says.

"It has gone beautifully. The main building contractor has been very impressed with the smoothness of the operation - the pods arrived on site on schedule and the build program is spot-on. It's been a great collaboration between the build contractor and CIMC," he says.

CIMC MBS is a subsidiary of China International Marine Containers, a Shenzhen-headquartered company founded in 1982. It initially started as a manufacturer of shipping containers but over the years expanded into building ships, tank storage facilities and oil rigs, and even financing projects.
China International Marine Containers established its subsidiary CIMC MBS in 2004 to provide modular buildings internationally.

CIMC MBS established offices in the UK in 2011 when it acquired the modular system design company Verbus. Verbus was established in 2005 and has worked with CIMC MBS in transporting modular units. It was hit badly by the recession, as clients became more conservative and switched to traditional construction.

CIMC MBS saw value in Verbus and felt optimistic about the growth of modular construction in the UK, so it acquired the company, which at the time had three employees. The team has grown to 10 staff members, who mainly talk to UK companies and communicate their needs to the Chinese headquarters.

"One big change that has greatly facilitated the company's UK growth is the decision four years ago by CIMC subsidiary CIMC Capital to finance some of the company's projects in Britain," Crane says.

Before that, CIMC was only a subcontractor in the construction process, dependent on satisfying the requirements of many other parties in the process, including the investor, developer, main contractor and design team.

But by having CIMC Capital become the investor in a project, the company can influence project guidelines to suit its own systems and capabilities. For example, it can make minor adjustments to the scale of a hotel room unit to make the manufacturing or transportation process more suitable for its systems.

Crane says the arrangement with CIMC Capital took a long time to establish because such a model was unprecedented for the company and for UK hotel groups.

Traditionally, the hotel groups pay for modular units in advance, effectively purchasing them from CIMC MBS. But if CIMC Capital finances the overall project, it reserves the right to take over the hotel if it cannot successfully pay back the borrowed amount within the agreed timeframe.

Crane says CIMC Capital does its own due diligence on projects and only invests in projects that make sense financially to the company.

Despite the optimism and advantages of modular construction, Crane says it is still a new field and sometimes clients do not like to be early adopters.
Most of their projects have been in operation for two to three years, but many hotel groups want to see established projects which have run for five to 10 years.

CIMC MBS's expansion into the UK's modular construction market came at a time when many other Chinese companies also saw this opportunity.

Last year, China Triumph International Engineering Co announced a plan to build six modular housing factories in the UK over the next five years. They will create 25,000 new homes and employ 200-250 people in each factory.

Meanwhile, Beijing Construction Engineering Group is also bringing modular construction expertise to the ��800 million ($1.2 billion; 1.04 billion euros) Manchester Airport City project, in which it is also an investor.

Crane is optimistic about CIMB MBS' future development in the UK's modular construction market and. Meanwhile, his team is exploring a new business area, which is to expand modular construction to Africa in partnership with UK hotel groups. Having a base in London is perfect for this work because London is where many African hotels are financed, he says.

At the Africa Hotel Investment Forum in 2015 in Ethiopia, CIMC MBS worked with Hilton to exhibit a modular hotel room at a reception Hilton hosted the evening before the conference.

"Hilton wanted to show the African investors that, if they order a Hilton modular hotel room from CIMC MBS, this is exactly what they would receive - the same room, the same quality, same materials and same standards," Crane says.

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