The amount spent on capital expenditures (“cap ex”) for the U.S. lodging industry is forecast to be at a record level of $6.6 billion in 2016 (US$1,350 per available room), up from US$6.25 in 2015, according to Bjorn Hanson, Ph.D., clinical professor at NYU’s hospitality program. Capital expenditures have increased every year since 2010.
Hanson added that a trend that became significant in recent years and that continues to influence capital expenditures is what guests post on social media about property condition, amenities and design. This form of guest satisfaction information and the public nature of the comments, especially unfavorable comments and criticisms, are resulting in additional capital expenditures as owners and managers respond.
Capital expenditure priorities include improved guest amenities and services such as:
- Redesigned lobbies with congregation areas, entertainment systems, and connections for computers and digital devices
- Increased high speed internet capacity/bandwidth in lobbies, guest rooms, meeting rooms, and food and beverage outlets
- New restaurant, food and beverage, and service concepts
- New or enhanced in-room amenities including irons/ironing boards, coffee makers, upgraded radio/alarm clocks/sound systems, iPads, art, and decoration packages
- Larger flat screen televisions and in-room entertainment systems
- Technology, including upgraded revenue management and property management systems, life safety systems, and equipment to support social media initiatives
Among the newer and more expensive capital expenditure programs required by many brands include:
- New lobby designs and concepts including eliminating a traditional front desk, creating congregation areas with increased bandwidth and electrical connections for computers and digital devices
- Replacing tub/shower units with walk-in showers, usually for King bed rooms
- Mandatory increases in high-speed Internet capacity – typical costs are US$50,000 to US$100,000 per hotel
- RFID electronic card key systems – typical costs are US$250 to US$750 per guest room
- There continue to be large investments being made in audio/visual (A/V) equipment for meeting and function rooms, but the trend is for outsourcing those services (and expenditures) and receiving a commission from A/V providers, typically 50%.