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Renew and Refresh Is Newest Emerging Trend

At BITAC® International Luxury, attendees learned that renovations are the next big trend.

Thursday, March 25, 2010
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Get ready for a renovation Renaissance. Multiple factors are converging to create a perfect storm scenario where investing money into refreshing existing properties is quickly becoming en vogue. Combine that with a more focused emphasis on going global and its completely changing lodging industry supplier strategies.

Be warned, those industry players that think myopically and consider the United States as the main place to do business risk missing out on as much as 50 percent on the planned projects set to begin during the next few years.

In fact, going global was the centerpiece theme of this week’s BITAC® International Luxury. The sold out event, sponsored by Hotel Interactive®, was the 20th BITAC® since the conference’s inception five years ago. And success minded attendees were highly focused on learning how to leverage the changing nature of the global lodging industry to maximize sales.

“Renovations are going to be the big key going forward. During the last five years things have flip-flopped,” said Bruce Ford, Senior VP Sales with Lodging Econometrics, a global real estate authority on hotel construction and renovation pipelines. “Renovations are going to compensate for the loss of new rooms.”

BITAC® International Luxury attendees agreed with Ford’s assessment too. When asked in a real time audience poll “What percent of new jobs will be renovation vs. new construction” 54 percent said renovations will dominate while an additional 25 percent said renovations will have a two to one margin over new construction. So it seems pretty evident everyone is preparing themselves for this new orientation on rebuilding rather than new construction.

As funding issues for building new hotel properties persist, the spate of foreclosures spurs below market value sales and aging properties built during the construction boom that started in the mid 1990s and persisted through 2008 will all help push the need for suppliers to focus on renovations.

But the biggest renovation driver of all may just be reflaggings. According to Lodging Econometrics, reflaggings are increasingly becoming a major part of leading hotel franchising companies. During the fourth quarter of 2009 (the latest stats available) in the United States, Marriott Internatioal, for example, announced 7,792 room were added to the new construction pipeline while an additional 1,185 rooms were set for reflagging to a Marriott brand. Hilton Worldwide announced 9,644 new rooms and 1,256 reflagged rooms, Choice Hotels International announced 2,073 new rooms and 5,544 reflagged rooms, InterContinental Hotels Group – the pipeline leader – added 11,762 new rooms to the pipeline and 4,282 reflagged rooms while Starwood announced 2,107 new rooms and 417 reflagged rooms. Meanwhile Hyatt Hotels Corp added 1,321 new rooms to the pipeline and 159 reflagged rooms as Wyndham Worldwide is seeing 5,697 new rooms and 259 reflagged rooms. Finally, Carlson Companies added 5,119 new rooms to the pipeline and 706 reflagged rooms.

“You have to start thinking more globally,” said Ford. “For full service hotels specifically you need to look at Asia Pacific. It’s the number one topic in board rooms.”

That’s because of the sheer opportunity to be had in emerging nations. Globally Marriott International has 44,910 rooms under construction and 5,728 set to be reflagged. Hilton Worldwide has 35,564 rooms under construction and 4,887 set to be reflagged while Choice has 7,943 rooms under construction and an incredible 16,056 set to be reflagged. Starwood has 37,933 rooms under construction and 1,508 set to be reflagged as Hyatt has 10,696 rooms under construction and 315 set to be reflagged. Wyndham has 21,355 rooms under construction and 1,196 set to be reflagged and Carlson has 23,792 rooms under construction and 2,388 set to be reflagged.

“Hotel brands are going to grow, but differently. Fortunately the industry is stabilizing slowly,” said Ford, who noted that casino resort projects are a continuing force. In Macau construction will again commence on some major projects that had been stalled during the last two years while properties such as Wynn Las Vegas are about to renovate its entire crop of 2,700 rooms.”

He also urged suppliers to update sales plans for the new realities in the marketplace and to reconnect with best customers.

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