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BITAC® Report - Renovations Set to Skyrocket

At this week’s BITAC® Purchasing & Design West attendees all say the industry's bread will be buttered by myriad renovations during the next few years. Here’s why.

Monday, October 18, 2010
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It’s time to get back into the game. That’s right; we’re not messing around with this one. The dreaded down days are over and the industry is in the midst of an upswing – although it is still in its humble beginnings.

But according to the fundamentals, the hotel business is headed toward a comeback. And it couldn’t happen soon enough. Though pricing power still seems to be a nagging issue, demand has come roaring back – 6.9 percent this year says STR. It’s translating into real change and setting the stage for what looks to be an unprecedented renovations market.

This week we’re at the Buyer Interactive Trade Alliance and Conference (BITAC®) Purchasing & Design West, here at the luxurious Red Rock Casino Resort and Spa in Las Vegas. This sold out BITAC® event had more than 300 people in attendance, the most ever for the renowned supplier/buyer matchmaking event.

“There is going to be a surge in renovations going forward,” said Greg Wysocki , Senior Director, Global OS&E Procurement with Starwood Hotels & Resorts Worldwide, during this morning’s kick-off panel. “We have been rejuvenating the Sheraton brand for example, and hotels that weren’t performing were pushed to renovate and to push BSI scores. If you continue to put off renovations, you run the risk of destroying brand loyalty.”

With the hotel business in the doldrums for so long many hotel ownership entities kept putting off CapEx plans. Further complicating matters was that many brands became extremely forgiving of their franchisees financial woes and gave hotel leeway for getting those hotels up to snuff. It made sense un an unprecedented down economy, but now that’s changing.

Utilizing a real time polling mechanism, BITAC® attendees were asked to vote whether they are seeing more money becoming freed up for renovations. An incredible 87 percent said either yes, or it looks like it is going to happen. Only a small 13 minority saw it otherwise.

Bill Langmade, President/CEO, Purchasing Management International, agreed. “We are seeing a larger uptick for a lot of reasons, they have the cash to do it and there are more hammers coming down on those people who haven’t renovated for several years,” he said.

“We have 12 model rooms under development right now, which is a lot. Model rooms mean they are getting ready to “pull the trigger” on a renovation and are in the process of putting money together, for example,” said Nancy Nee, CPM, Director of Strategic Sourcing, Hilton Worldwide.

Meanwhile it looks as if hotels are gaining more pricing power as the demand surge increases owner confidence to charge more for their rooms. “I stayed at a hotel in Portland that was sold out for a week; rates are edging up,” said Donald Griner, Senior Director, Design & Innovation with Choice Hotels International.

Moments like that are boosting everyone’s spirits that business will grow in 2011 for both industry suppliers and hotels. They’re seeing an uptick in customers coming through their doors and their gaining confidence to increase the rates charged for a room night.

BITAC® attendees, which was comprised of an audience of about two-thirds industry suppliers, see their business growing substantially next year. A whopping 37 percent see their business increasing between 10 percent and 19 percent, while 20 percent of the crowd sees business increasing between 20 percent and 29 percent.

Said Starwood’s Wysocki: “From a Starwood perspective, Q3 and Q4 2010 are showing strength to drive the rest of the business into next year.”

Though rooms will get some much needed refreshing Mary Sreenan of First Impression Designs said renovations will be done more strategically. “As the market is progressing and renovations are taking place, design is an extreme focus. Designers have to become very creative to fit renovation budgets and we are stretching our creativity to do it.”

Hilton’s Nee said she is seeing a different scenario where designers are specifying very expensive product on renovations. She said they are looking for traditionally high priced items to come in at a lower cost. And while that may not make sense at first glance, prices for all good have come down in the last two years.

“Designers are finding expensive things for a lower price. A room that used to cost $15,000 to renovate is now $12,000 per room,” said Langmade.

Consumer taste is changing too. They want the more eclectic, said Choice’s Griner. Even in the midmarket, where Choice specializes.

“We put pressure on vendors to bring more boutique products to the mix for our Cambria Suites brand for example,” Griner said.

BITAC® Purchasing & Design West continues through tomorrow and we’ll be delivering news to you all week here and on this Wednesday edition of ‘This Week in Hospitality’ available for download at Hotel Interactive® Radio. (www.hotelinteractive.com/radio.aspx)

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