Renovation: Doing more with less

As the hotel industry climbs out of survival mode, owners are faced with facilities overdue for a freshening. In addition, many of the new transactions require a Property Improvement Plan (PIP), which includes renovation as a key component, and many new owners find significant upside potential with targeted repositioning of the asset. These two factors are driving a resurgence in improvement activity not seen in years.

This industry rejuvenation is great news on the surface, but it creates an underlying challenge. After downsizing their operations to the bone, hotel industry suppliers are challenged to handle the sudden upswing. As some frustrated owners have seen already, renovations put off for so long are now stymied by delays in getting designs produced, procured and executed. This comes as a surprise to many hotel owners and managers, who expect suppliers to be uber-responsive after being in the trough for so long.

A more studied approach

The slowdown in the renovation cycle, combined with increased caution by investors, is producing a silver lining: a more focused, thoughtful approach to renovations. The days of “throwing money” at a hotel to completely remodel it from top to bottom are over. The trend ahead will be to “do more with less,” using a selective focus in areas such as:

  • Rooms: Instead of an expensive entire room remodel, many hoteliers are concentrating on targeted renovations that they believe will derive the greatest value to the consumer and the best return on investment. We are seeing an increased concentration of selective re-use of casegoods with new hardware and tops, creative approaches to lighting and soft goods, targeted bathroom renovations to the vanity experience, selective conversion of underused bathtubs into more popular shower stalls, and an upgrade in technology.
  • Food and Beverage: Operations are being redesigned and streamlined so that one kitchen can serve all F&B outlets in the hotel; or better yet, one multipurpose three-meal restaurant can accommodate all diners. The trend is toward fewer, more creative in-hotel restaurants and bars located on ground level, that can better lure guests from their rooms, and compete more effectively with those in the neighborhood.  
  • Lobbies: While avoiding extravagances, many hotels will increasingly use the lobby to convey their distinct personality and brand and often integrate the F&B offerings rather that burying them within the hotel. Select-service hotels, in particular, will burnish their often spartan lobby ambiance to better compete with upscale full service establishments. Many major select-service brands are developing wholesale upgrades to their lobbies and F&B concepts in a programmatic fashion over multiple sites. Owners with large blocks of similar assets find this strategy particularly conducive to “speed to market” in maximizing their strategic brand initiatives across multiple geographies.
  • Meeting Space: The quality of meeting space has a direct influence on group business. An increase in competition for meeting space is linked to room blocks, and many owners and operators are again focusing on providing more variety of meeting spaces while improving design, lighting and technology.

Looking at the year ahead, renovations will be conducted with a much keener eye on ROI than in the past. This intense focus on return on investment will be echoed in general hotel operations as well, such as energy cost savings. Huge technology strides in the past five years have slashed payback periods on equipment and fixtures from property management systems to lighting to HVAC that can add, in some cases, hundreds of thousands of dollars each year to a hotel’s profitability. The challenge is to make the wisest choices from the multitude of products and suppliers available, sorting through their often-conflicting claims.

Scheduling for success

Looking ahead, a major factor in the success of a hotel renovation will be not just “what” is being done, but “how” the process takes place. Renovations are being targeted and phased further in advance to take advantage of a hotel’s slowest periods, to accommodate FF&E long lead times which often become a project’s critical path, and to plan ahead for minimum revenue displacement. Efficiency will become increasingly critical. Construction and procurement schedules must be committed and delivered, because neither the owner, the operator nor the project team can afford to be even a week late. 

Instead of bringing individual design and construction teams into a project when it’s “their turn,” strategies are changing to engage all stakeholders at the beginning of the process for communication, early budget and schedule validation, and confirmation of hidden conditions, as well as long-lead procurement advantages. Absolute clarity on the owner’s objectives and enforcing check points throughout the cycle is a must for mitigating risk.

Contributed by David Black, managing director, project and development services, hotels and hospitality, Jones Lang LaSalle