2022 Recovery… The Critical Importance of Maintaining Your Hotel’s Existing Assets, Specifications and Costs during PIPS and CAP-Ex Renovations!
“One of the biggest concerns is always making sure that a project finishes on time and on budget. It all starts with putting together preliminary budgets,” said Mark Friesen, Principal, Beyer Brown.
If your hotel is facing a renovation in 2022, the more detailed planning and communicating you do right now with your general contractor, designers, suppliers, teams and importantly your guests, the more cost-effective and successful your renovation will be.
How do hoteliers with existing properties compete with more brands, new hotels and multi-purpose properties?
1. The Key is to Focus on improving your Existing Assets.
2. Plan Early and Communicate with Your Team.
3. Don’t Make a Price-Driven Decision and Don’t Throw Away the
Specification!
4. Add more Sustainability into your Project and Hotel.
5. Reinvest Your Savings into Your Hotel, Employee Training, Security,
Technology, HVAC, Lighting and more!
Additionally, do you know how critical it is to have planned preventative maintenance built-in to your asset management?
Hotel maintenance accounts for between 4% to 6% of the hotel’s operating budget.
Photo Credit: CAPEX Report 2018, ISHC, HAMA
According to the U.S. Lodging Industry Capital Expenditures Trend Analysis Report by Bjorn Hanson, capital expenditure spending is forecast to increase by approximately 70% in 2022 and is slated to be at record numbers through 2024.
In Alan Benjamin’s (IHSC) article: Special CapEx Considerations for the COVID-19 Era, there are four major components that lead to an expected expenditure increase for 2022.
• The emergency reallocation of CapEx funds for many hoteliers in 2020. According to Benjamin, many lenders granted permission to use the 4% CapEx reserve for more immediate expenditures.
• The scheduled CapEx needs of hotels opened or renovated in the past 5-7 years are coming due.
• The importance of optics and the perception of cleanliness for guests who are becoming more discerning and critical along with having access to instant feedback and rankings on social media.
• The swift reinforcement of brand standards following the relaxed regulation during the height of the pandemic.
Other key areas discussed that are contributing to the expenditures include deferred maintenance, further reconfiguring of food and beverage outlets, compliance with brand standards, increased high-speed internet capacity, electronic door lock and access systems, and further enhancements to health systems and practices.
Photo Credit: CAPEX Report 2018, ISHC, HAMA
As hotel brand options multiply, PIPs continue to take center stage for hoteliers. Planning for PIPs early on can directly increase proceeds to sellers and lower the costs for buyers in most hotel transactions. In the right market conditions, a PIP can be highly beneficial. PIP renovations often create a path to increased profitability, providing a favorable return on investment.
It does takes time to get a PIP review in hand from virtually all the major brands. Usually, three to six weeks are required to prepare a PIP document that generally remains valid for six to 12 months so plan for a realistic timeline. Both the scope and completion time frame of a PIP are often negotiable. But is it possible to push back the bathroom renovation an additional 12 months? Would the brand consider removing certain elements of a PIP, taking into consideration all the other capital being spent at this property and other franchised hotels? You may be able to negotiate renovation for some areas but when it comes to the condition of the FF&E, it is the largest part of the hotel’s asset and must be addressed immediately. As they say, you don’t get a second chance to make a first impression with your guests and that includes the condition of your guest rooms.
While some hotel companies are loosening up on brand requirements, regarding materials, in order to remain flexible on costs, dual-build hotels are becoming more common to retain value while providing two distinct products. “Sharing certain back-of-house spaces such as laundry, offices and even public spaces can help with the economics of development,” states Nate Gundrum, VP of Real Estate Development at Mortenson Development. “Hyatt developed a dual-build prototype for its Hyatt Place and Hyatt House brands, as well as a method to build that in an efficient way.” Marriott has gone a step farther and opened a tri-brand hotel in Nashville, featuring AC Hotels, Springhill Suites and Residence Inn.
Photo Credit: Marriott News Center, Tri-branded Hotel – Nashville
In most cases, updating guestrooms and public areas allow a hotel to be more competitive both for transient and group demand. If a PIP gives a hotel a chance to stand out among the competition, it can reward the owners with a greater market share and increased customer satisfaction, and thus a greater profit. Hotels are always looking to create those “Instagram-able spaces” within their hotel.
With the ongoing demand and increase of brand options contributing to rising PIP costs, parent brands seek to differentiate consumer experiences at each of their sub-brands, partially through furniture packages, revamped amenities and finishes. The total amount of work required to meet brand standards under a PIP can vary tremendously. These factors typically depend on:
• the property condition
• length of time since the property’s prior renovation
• and recently enacted brand standards not completed by the seller.
Photo Credit: New York Magazine
For over 45 years, The Refinishing Touch® has been at the forefront of providing the hospitality industry affordable and sustainable FF&E solutions and asset management. As a trusted PIP Advisor and Preferred Supplier for Hilton and many more brands, we have completed over 7,800 renovation projects nationwide. We help Project Managers, GM’s, Chief Engineers, effectively navigate around the costly PIP pitfalls because of our years of experience and expertise.
This is a time to be flexible, creative and, most importantly, calm. A level–headed approach to projects, collaboration as a project team and “overcommunication” has never been as important. Remember, if “Plan A” does not work, there are 25 more letters in the alphabet!” – Alan Benjamin.
Photo Credit: The Refinishing Touch®
If the brand believes in the ownership and with the proposed upgrades in the PIP that the asset will complement the market, they may be more willing to defer or modify certain requirements. This strategy allows the buyer to negotiate with the brand for certain PIP modifications and controlling capital expenses. With an accurate understanding of the PIP cost, that is the time to negotiate with a trusted contractor to get your hotel completed within the budget and scheduled time frame.
Whatever your costs are, we always encourage hoteliers to contact The Refinishing Touch® early in the specification process. It gives us the opportunity to save you even more money without incurring more costly missteps that could be avoided. And while our goal is to help you avoid pitfalls with our years of experience and expertise, we also know that if price is driving your decision, that can be the costliest misstep.
Photo Credit: The Refinishing Touch® – Community of Services
The Refinishing Touch® provides sustainable and affordable on-site solutions with savings of at least 50% up to as much as 80%. In addition to extending the life of your FF&E for several more years, it provides the opportunity to take those years of savings and reinvest them into other areas of your hotel experiencing exponential change such as technology upgrades, security enhancements, HVAC improvements and more. With the enforcement of mandatory cleaning protocols, the money saved can be used for implementing these critical programs and for retraining your staff.
Photo Credit: The Refinishing Touch®
Photo Credit: The Refinishing Touch®
Photo Credit: The Refinishing Touch®
Did you know that around 2% of the world’s carbon emissions come from hotels? “An owner’s asset management program should act as a crystal ball to your building’s future.” – Harold Stephens, President PBK Company, IIBEC BEAM Professionals.
With the tremendous financial investments being committed toward reconnecting the brands with guests, it is more critical than ever for hotel owners, asset managers, hospitality management companies to really re-examine their portfolio and hotel assets. If your hotel needs updating and guest rooms need to be refreshed with a soft goods renovation, The Refinishing Touch® provides many viable and sustainable options!
Photo Credit: The Refinishing Touch®
The Refinishing Touch® team will partner with you and review all the critical details during preconstruction planning of your renovation and provide many options you may have not considered. We provide on-site full refinishing, re-engineering and reupholstering but we additionally provide solid surface replacement including stone, glass and laminate. We also provide decorative hardware selection. Our expertise includes providing strategic timing for when it’s best to have our team on the property during the renovation to keep it running seamlessly. We save you additional costs by not moving the furniture out of the rooms and incurring additional manpower, time and storage and reducing downtime of rooms out-of-service by getting the rooms back in-service the same day in many cases. This sets us apart and provides you with a trusted partner that has the professional experience you can count on.
Call today and request your online quote at 1.800.523.9448. Discuss with Jeanne Shannon, Corporate Director of Sales, Marketing and Business Development your upcoming renovation project. It would be our pleasure to be your Sustainable, FF&E Solution Provider! For more information about our community of services, we invite you to visit www.therefinishingtouch.com.
RESOURCES:
Navigating the PIP Process with a Project Manager
By Stephen Siegel, Principal of H-CPM (Hospitality CPM)
Best Practices for Managing Your Hotel’s Next Property Improvements by Lillian Connors
Preparing for a transaction in a new era of PIPs
By Nick Plasencia & Lou Plasencia