THE KEY TO COST-EFFECTIVELY NAVIGATING YOUR HOTEL PROPERTY IMPROVEMENT PLAN! (PIP)
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.
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 “instagrammable spaces” within their hotel.
Photo Credit: The Edwin Hotel Chattanooga
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 42 years, The Refinishing Touch® has been at the forefront of providing the hospitality industry affordable and sustainable FF&E solutions. As a trusted PIP Advisor and Preferred Supplier for Hilton and Host Hotels and Resorts and many more, we have completed over 7,000 renovation projects nationwide. We can help project managers, GM’s, Chief Engineers, effectively navigate around the costly PIP pitfalls because of our years of experience and expertise.
If the brand believes in the ownership and with the proposed upgrades in 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.
In June of 2019, Arne Sorenson, Marriott’s Chief Executive, pledged to invest $500 million dollars into updating the Sheraton brand, it’s look and its reputation. The Sheraton Grand Phoenix, a 1,000-room hotel renovation, is expected to wrap up at the end of this year or in early 2020, and it will take five to seven years for a “critical mass” of Sheraton hotels to be renovated.
You may not have $500 million to invest, but 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.
Photo Credit: The Refinishing Touch®
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 timeframe 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. Preventative maintenance also includes taking care of the guest room FF&E and making sure you stay ahead of any issues. Depending on the size of the hotel, maintenance accounts for between 4% to 6% of hotel’s operating budget.
Photo Credit: CAPEX Report 2018, ISHC, HAMA
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.
Photo Credit: The Refinishing Touch®
With the incredible growth in the hospitality industry and 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 pre-construction planning of your renovation and provide many options you may have not considered. We provide on-site 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 us today for your online quote at 1.800.523.9448 and email Erek Schwartz, Sales Manager at Erek@trt-us.com to discuss your 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
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