Renovations abound in the hotel industry today, but that doesn’t necessarily mean hoteliers are doing so to prepare for a downturn. In many cases, it’s about maximizing ROI and driving revenue.
REPORT FROM THE U.S.—Renovation projects proliferate in today’s landscape. But while hoteliers are getting their hotels in tip-top shape, sources said it’s not necessarily as a way to plan for the next downturn. Rather, they are using the opportunity to stay competitive and maximize return on investment.
“While hoteliers have a reputation for frugality, capital expenditures are a vital and necessary part of a hotel’s ongoing lifecycle,” said John Edwards, VP of design and construction at Hospitality Ventures Management Group, via email. “If owners and operators are not consistently improving and upgrading their products, dips in occupancy and rate are sure to follow.”
HVMG recently announced eight renovation and construction projects totaling $110 million, ranging from public spaces, meeting areas and guestrooms. Edwards said the decision to renovate was based on each project’s individual deal and long-term hold and exit strategy.
“All the renovations HVMG is handling are a combination of the logical result of our deal thesis on the individual projects and the result brand-mandated (property-improvement plans) following ownership change as opposed to being a part of the traditional refurbishment cycle,” he said.
At the Myrtle Beach Marriott Resort & Spa at Grande Dunes, Director of Sales and Marketing Cindy Hull said the hotel’s $14-million renovation was initiated as part of a normal renovation schedule and not part of a PIP. Last year, the property’s meeting space was overhauled, and the most recent renovations of the guestrooms were completed in March.
When asked whether the renovations are top of mind because an industry downturn may be on the horizon, Hull said no.
“As far as bookings are concerned, this year is good, and next year is pretty strong as well,” she said. “We look OK. We don’t anticipate a downturn.”
Bob Kraemer, co-founder and principal at Kraemer Design Group, said hotel design and renovations relate directly to revenue.
“For the branded hotels that have always had the true prototype look, the end user is bored with it,” he said. “We believe it will materialize in loss of revenue for hoteliers. The opportunity for renovations is ripe.”
Kraemer said the No. 1 area he is seeing renovations is in the public space, especially the hotel lobby bar.
“People have a desire to hang out in those areas if they aren’t generic boilerplate ones,” he said. “The income revenue opportunity is there, and people will spend if it’s a fun experience.”
While 10 years ago hotel lobby bars tried to emulate sports bars, Kraemer said they are now places that can live all day as a place to work before turning into a fun drinking spot at night.
“All the major brands did this already in a sense, but it’s all cookie-cutter,” he said. “Others have tried and it worked functionally, but now it’s time to go more unique.”
That uniqueness can come from localized and authentic experiences, such as bringing in coffee from a local company and beer from a microbrewery.
When it comes to guestroom renovations, Kraemer said he wouldn’t recommend speeding up the clock to update those spaces unless the product is old.
“It won’t bring in the dollars,” he said. “The public area is the key.”
However, at the Myrtle Beach Marriott Resort & Spa at Grande Dunes, the team did see the need to update the 405-room hotel’s guestrooms during its renovation schedule. Hull said guestrooms saw an update of everything “from soup to nuts,” including new furniture and soft goods. Double rooms now have two queen-sized beds instead of two double-sized beds to give more flexibility for travelers. All of the guestroom bathrooms’ bathtubs have been converted to walk-in showers. TVs have been replaced with 50-inch flat screens that allow guests to stream entertainment such as Netflix.
“We wanted to concentrate on one area at a time during our renovations,” Hull said. “That’s the reason why on the off-season we focused on the sleeping rooms and the hotel tower.”
In the fall of 2017, the property’s lobby and public space will undergo a makeover as well, she said.
Working within budgets
For hoteliers who might have smaller budgets to work with, Kraemer suggested some cost-effective areas to focus on that will translate to ROI.
“Even within the public area, it’s not about spending money on the pool area,” he said. “It’s really about trying to be in front of the house at the entrance point.”
Kraemer said hoteliers should stretch their money so that they don’t spend it all in one area to make it perfect, leaving the rest of the hotel not feeling unified. He said it’s about being clever with the dollars.
Although he said public areas are top priority, sometimes other areas will need updating as well. Outside of public space, he suggested hoteliers change out upholstered products in guestrooms and consider changing out colors that can become dated even after five years. Additionally, he said artwork is usually done on the cheap, so hoteliers might consider replacing generic art with something more authentic and inspired by the local area to help break a cookie-cutter stereotype.
“We can do a lot of refresh with lower cost materials rather than, say, switching out granite,” he said. “Paint is cheap. Fabrics are fashionable. If a lounge piece looks dated and dirty in a room, replace it. A dresser can be worn out, so we figure out how we can accessorize the room.”
Kraemer said those small tricks can help give spaces a facelift that guests will notice.
“We see a return on investment immediately because it’s fresh,” he said.
And when it comes to investing in some guest-facing technology, Kraemer said it could just be a waste of money.
“Guests still like big TVs, but they don’t need all the bells and whistles,” he said. “Everyone is spending a lot of money on technology, trying to put in the bells and whistles, but it doesn’t hit the bottom line. It’s so expensive and it dates itself quickly, so it’s not worth it.”