With the end of the year rapidly closing in, it is interesting to reflect on the 2nd quarter report for 2019 where Lodging Econometrics analysts detailed the leading franchise companies and their brands in the construction pipeline.
These 3 franchise companies alone comprise 70% of the projects in the total U.S. lodging pipeline in the first half of 2019. 2nd Quarter, leading the pipeline:
● Marriott International with 1,469 projects/193,458 rooms, up 9% by projects and rooms year- over-year (YOY)
● Hilton Worldwide currently at 1,372 projects/152,853 rooms, a 3% increase YOY (coming off last quarter’s all-time high)
● InterContinental Hotels Group (IHG) follows with 962 projects/97,647 rooms, also up 3% by projects and rooms, YOY.
The leading brands in the construction pipeline for each of these three companies include:
#1 Home2Suites with 413 projects/43,040 rooms
#2 Holiday Inn Express with 410 projects/38,814 rooms|
#3 Fairfield Inn with 300 projects/29,133 rooms
In 2021, LE forecasts that Marriott will open 328 new hotels/40,841 rooms, IHG to open 284 new hotels/27,810 rooms and Hilton to open 268 new hotels/29,373 rooms. Should all these hotels come to fruition, these three companies will continue their dominance opening 73% of all the new hotels in 2021.
Brands continue to aggressively develop including St. Regis Luxury brand Zadún, a Ritz-Carlton Reserve in Baja California.
“Zadún, like each Ritz-Carlton Reserve, is a rare estate that allows guests to feel completely immersed in the stunning fabric of the destination,” said Lisa Holladay, Global Brand Leader for The Ritz-Carlton and Ritz-Carlton Reserve. “Through bespoke design, thoughtful amenities and innovative culinary offerings, guests of Zadún will enjoy a highly personalized, transformative experience completely unique to the destination.”
Photo Credit: Marriott News. Created to offer the ultimate in luxury, the striking design of Zadún, a Ritz-Carlton Reserve, celebrates both the desert and the sea with 115 elegantly appointed guest rooms and suites.
Additionally, ACCOR just launched their 39th hotel brand called Greet, in Paris. The eco-friendly GREET was created to meet the demand for more sustainability & authenticity. With upcycled furnishings & “less is more” design elements, the rooms feature locally sourced furnishings. The hotels will be community-based. It aims to open 300 Greet Hotels by 2030. Heather McCrory, CEO of ACCOR recently stated luxury & lifestyle areas are their niche markets. They experienced an increase of +32% from 2017 & are focusing on expansion in gateway cities such as Miami, NY, Chicago, L.A., Toronto & Mexico City. ACCOR has more than 4,900 hotels spread across 110 countries.
Photo Credit: ACCOR Hotels; Greet Hotel Paris
As hotel brand options continue to multiply, PIPs also 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. 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.
We always encourage hoteliers to contact The Refinishing Touch® early in the specification process. It gives us the opportunity to save you time and 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.
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.
Photo Credit: CAPEX Report 2018, ISHC, HAMA
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. 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.
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.
There has been a lot of discussion on the design side of the hotel industry regarding brands expanding their flexibility & adaptability in the industry. For a hotel brand, it’s the value perception of an experience we promised to them as stated by Alan Roberts, Global Head, Embassy Suites by Hilton. Allowing more room in the brand provides opportunity for regional tweaks. Hotels can put their stamp on the property becoming more connected, authentic. Activating more freedom of design in the common areas & public spaces requires inviting the local culture to truly be showcased with local artists, F&B enhancements, music. All these add to that experiential luxury guests are looking for.
Millennials expect their hotel stays to be as convenient as using their phones. They expect a customized experience, digital convenience and relevant information on social media. They want that “immersive destination” and while many plan their trips in ad hoc fashion, they book their hotel before arriving and rely on their hotel as an information resource when they get there. Every guest is different and so are their interests.
Photo Credit: Technology 4
According to research from Cornell Center for Hospitality Research, 50% of all travelers to the USA will be millennials by 2025. However, this doesn’t mean that you should be waiting 10 years to implement new and relevant hotel technology. In fact, as of 2013, millennials outnumbered baby boomers 79M to 76M, and as the boomers continue to age, that gap will continue to widen.
Photo Credit: The Hoxton, London
The common area with shared spaces is a prime example of how room-service that was considered a value-add, has been replaced with high-end technology wired common areas that everyone can enjoy together as an experience, whether sharing a drink, meal or working on a business proposal. The idea is that of sharing economy rather than owning economy.
Hotels that are investing more money creating those “Instagram-worthy” spaces understand that guests want to create an unforgettable and customized experience thus creating a richer life. There is a drive for fewer but better things of lasting quality – a new minimalism. If your hotel guest rooms and FF&E need to be refreshed and updated but your common areas need that as well, consider refinishing your furniture instead of replacing it. The Refinishing Touch® expertise of full refinishing services will meet brand standard specifications and provide substantial cost-savings that you can reinvest into updating your lobby, restaurant and bar, outdoor areas as well. You can also reinvest those dollars into technology, lighting, HVAC, security upgrades and so much more that will benefit your guests. Here are just a few examples of how actual clients saved between 70% to over 80% by choosing our environmentally friendly refinishing services.
Photo Credit: The Refinishing Touch®
For over 42 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 Host Hotels and Resorts and many more, we have completed over 7,000 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.
Photo Credit: The Refinishing Touch® – Community of Services
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 refinishing, re-engineering and reupholstering but we additionally provide solid surface replacement including stone, glass and laminate. We also provide decorative hardware selection.
Photo Credit: The Refinishing Touch® – On-Site Refinishing, Re-Engineering, Color Change, Solid Surface Replacement, Hardware Replacement
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