Ken Colao, president and founding principal of CNY Builders, has simple advice for hotel developers: Start building now. Sure, he probably wants your business, but he also believes construction costs are at an all-time low and won’t remain there for very long.

His firm’s principals have built more than 39 hotels, mostly in New York City and across all segments, and they too have felt the effects of the downturn. Colao sees business starting to pick up in the city that was booming like no other three years ago and he believes as the deluge of delayed projects restart, the cost of construction will quickly rise.

Colao’s firm recently completed a Marriott in Belgium and Sam Chang’s 584-room Tri-Pack project in Manhattan featuring the side-by-side Hampton Inn, Holiday Inn Express and Candlewood Suites. CNY has topped out on a 411-room Element and a 399-room Doubletree, which both should be open this fall. During a recent interview, Colao offered up his opinions on hotel construction and the state of it in New York City.

Have you had projects stalled or even stopped?
We’ve had a few projects started and stopped and also several projects where we had started design development. We can best serve a client being involved from Day One. So we get involved very early and a number where we started in design in 2008 are just about complete and looking to break ground in a few months.

Is New York City still a great market to build a hotel?
Hotel wise, I think New York City is still underserved. Rates have dropped significantly, but occupancy levels for the most part stayed significantly higher than what was experienced elsewhere. There’s a depth to this market. Right now is an ideal time to be starting construction in New York City if you have financing and a well-conceived project.

How has the downturn affected hotel construction there?
Any bubble has projects that are ill conceived and those probably should have never gotten built anyway. Those will get weeded out, but there are some very good projects that have design drawings fully developed and are only waiting for financing. This is where some of our clients are. We’ve been advising clients who are able to secure financing to start as fast as they can. My experience in the last three recessions is when construction costs drop, they quickly recover on the other side when things begin to improve—within a year of recovery costs are equal to what they were.

Is that what you see happening now?
In the past (costs) rise more slowly. There are so many good, viable projects sitting on the sidelines waiting and with a construction industry that has gone through its shakeout—with massive layoffs there are a lot of people out of work—that when financing comes available there will be a rush of the many projects already designed. They’ll quickly absorb the marketplace and drive up costs.

How far have construction costs fallen?
Costs are down across the board, in total about 20 to 25 percent, both in material and labor. There’s been a slight uptick in material costs, which bottomed last August and have crept up.

What should a developer or investor look for when hiring a construction company or contractor?
I think the hotel industry is a unique animal; it’s not just a real estate play, but also an operating business. Because the operating business is so much affected by guest experience and the environment being created, the contractor or construction management needs to be sensitive to that. In the course of design, development and then execution, when issues come up (good contractors are) thinking how will this affect guest experience and operating costs down the line. That’s what I’d look for and that’s what we look for when hiring subcontractors.

What is happening to all the stalled and even half-built projects in New York City?
New York City adopted a stalled site program. All of a sudden banks, developers and contractors were walking away from sites, leaving some half built. It could have been a threat to public safety, so the city adopted a plan by identifying all the sites and working with the land owners or lenders to safely secure them. There are (approximately) 900 stalled sites I think. I understand the majority is residential; maybe 10 to 15 percent are hotel projects.

Could some of those be an opportunity for a savvy developer or investor?
It does in some ways create some opportunities. Obviously those projects that were ill conceived from the beginning are destined to be demolished and perhaps relooked at. But a significant number probably make sense as the market comes around.