Independent hoteliers share spending priorities in 2017
Independent hoteliers share spending priorities in 2017
25 JANUARY 2017 1:27 PM

The owners and operators of independent properties explain what renovation projects, IT upgrades and unavoidable fixed costs are major parts of their budgets this year. 

REPORT FROM THE U.S.—With no brand requiring new standards or renovations, owners and operators of independent properties must set and follow through on their own spending priorities each year.

To get a better idea of some expenses worth considering, Hotel News Now reached out to a number of independent hotel owners and operators to see what they’re spending their money on and why.

Capital expenditures
While the property is in its slow months this winter, the owners of The Restoration in Charleston, South Carolina, decided to update the guestroom bathrooms and hallways, replace some furniture and update the property’s restaurant, said J.R. Anderson, VP of development at Jeffrey R. Anderson Real Estate. The company typically sets aside $500,000 each year for the hotel, he said, which amounts to between 5% and 8% of the annual revenue. While the physical scope of the work is smaller, it’s still a big dollar amount.

“It lets us stay ahead of the market, stay unique to guests every time they come,” Anderson said.

The restaurant portion of the project involved bringing in new chairs to replace the old barstools, he said, and they’re looking at other additions. The outdoor rooftop section will receive plants and new furniture to make it more luxurious, he said.

When choosing projects in the hotel, Anderson said company officials look at ways to improve the stay for guests while also making operations and maintenance easier. Spending a little extra now to make a better update could save time and money later on for something that would need to be repaired more often, he said.

While times are still good in the industry, every property managed by Provenance Hotels is undergoing full infrastructure assessments, said Chris Bebo, regional GM of Sentinel and Hotel Lucia in Portland, Oregon. The company is looking ahead for whatever work needs to be done within the next five years and addressing them, he said.

“The idea is to be prepared, to spend money proactively when you have it so when things slow down and it’s not as easy to come by, you’re not scrambling to fix basic infrastructure issues at the wrong time,” he said.

The company is continuing its work from 2016 looking at its properties from the top down, Bebo said, with structural and mechanical engineers looking at things such as roofs, elevators, cooling towers and boilers. The plan is to take their assessments and lay them out over a five-year capital expense schedule, he said.

“If guest elevators are nearing the end of their life expectancy, we can plan for capital expense of such big items,” he said. “Why wouldn’t we? Half a million now when times are good to forego having to come up with half a million in three years when the economy is perhaps not so good. It’s more strategic to manage tough times when they come and not having to plan or facilitate major expenses in infrastructure facility repairs when you can’t afford it.”

Technology upgrades
The Harvest Inn by Charlie Palmer in St. Helena, California, is upgrading some of its technology this year, said GM James De Luca. The property will upgrade its property-management system to the new software version, he said, and the hotel will start offering remote check-in, which will improve the guests’ arrival experience. A pre-arrival email or communication with guests will allow them to customize their experience more through choosing the time of arrival as well setting up an itinerary for the day.

“We will have all of the information and can greet them in a personal way and escort them through the property,” he said.

The hotel will receive a state-of-the-art guestroom phone system, he said. The staff will also receive Bluetooth radios to better communicate across the eight-acre property, he said.

Provenance spends a lot of time focusing not only on the end-user experience but also on the platform, Bebo said. The company is investing a great deal of money to make sure the networks are top notch to provide enough bandwidth and load balance, he said.

“Our guests come to the hotel with all the tech they could ever want,” Bebo said. “There’s not a whole lot we could add to that. The focus is making sure when they’re using their own personal devices, the experience is seamless.”

Fixed costs
Last year The Restoration added its own laundry facility, Anderson said, which required about $250,000 in equipment. But the on-site facilities allow the staff direct control over the cost as well as the care given to linens, he said.

Outside of that, the price of labor, electricity, gas and taxes continue to increase, he said. Charleston has seen infrastructure improvements, he said, and there have been increases in real estate taxes.

“That’s the biggest component I see changing as the government tries to balance their budget,” Anderson said.

When looking ahead the next five years for fixed costs, Provenance applies a year-over-year average increase that’s tied into what is known about cost-of-living increases and material good prices, Bebo said.

“A lot of that is unpredictable,” he said. “You make certain assumptions. Those expenses impact lots of things we purchase. We apply reasonable, sensible year-over-year increases to fixed costs. We’re subject to a lot more game-changing legislative ordinances that increase our fixed costs beyond our control—minimum wage and paid sick leave and restricted scheduling. We track legislatively what’s coming down the pike.”

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