Value Proposition

Renovation activity continues to ramp up throughout the lodging industry, according to a trio of hotel executives, all of whom acknowledged an increase in brand-mandated improvements and CapEx investments which had been put off in many cases since the outbreak of COVID.

The executives offered their insights on a panel entitled “Value Proposition: Why Design Updates Will Pay Off In The New Lodging Landscape,” which took place during last month’s BITAC Purchasing & Design East last month in Bonita Springs, FL.

Overall project activity continues to accelerate, according to Rob Laschever, principal, Cauhaus Design, a Frederick, MD-based architecture/interior design firm.

“We’re seeing a huge, huge wave [of projects]. I think there’s been a big backlog of things that needed to be done. Of course, the brands essentially are feeling like it’s time to wake up again and clearly when the giants wake up, everyone wakes up,” he said.

Chuck Engelhardt, principal, The Westley Group—a subsidiary of 5 Senses, which owns and operates more than 20 properties—reinforced the point.

“There’s a lot more renovations because there was a huge backlog, particularly with PIPs [property improvement plans], which got extended by the brands and now those extensions are coming to the end of their window. There’s a lot of PIP activity and a lot of deal opportunities for hotels that are in need of a PIP and the current owner doesn’t want to spend the money,” he said.

Michael Blank, principal, Woodmont Lodging—a Bethesda, MD-based owner/operator of major branded hotels—credited the flags for being patient, but noted acknowledged they are the driving force behind many of the property-level improvements.

“They’ve given you a lot of runway. I know Hilton has giving us 18 months on a lot of the PIPs I’m seeing, and Marriott is similar. If your scores are good they’ll even waive certain things, but they gave us 24 months of leeway and they’re done with that,” he said.

Blank went on to note that the industry has done surprisingly well when it comes to rates, which has also accelerated the need for renovations.

“We’re kind of a victim of our own success. We’re charging rates now that we’ve never seen in some of our hotels. If a guest comes into a hotel that’s 20 years old and hasn’t been renovated in 14 years and is paying 300 bucks they’re not very happy. So we kind of have to renovate because the guests are now expecting it given the amount of money they’re paying for a room,” he said.

Engelhardt also touted the industry’s ability to increase rates, but noted there is another side to that equation.

“There’s a big opportunity in rate right now and we’ve certainly been pushing rate. But we kind of live in a false economy presently in the hotel business because we’re still not providing a lot of services, but we’re charging the rate. The day is going to come when we’re going to have to clean rooms everyday again and we’re going to have to have full hours of food and beverage and it’s going to change the dynamic a little bit. I think that at that point is probably when you want to have whatever renovations you’re contemplating done because at that time the guy with the best product is going to win the rate,” he said.

Further expanding on that, Blank emphasized that there has been a “paradigm shift with expectations” for guests when it comes to service levels.

“To say that you wouldn’t clean your room for three days and people accept it would have been crazy two or three years ago and now it’s almost the norm. I think that we’re in a period where we can get guests to expect that if they stay one or two nights they won’t get a cleaned room. So from a room design standpoint I’m thinking about what do you do to maximize the space? How do you keep it clean so that when the housekeeper does come in after two days it’s much simpler to clean? I think you’ll see design changes to accommodate guests who are living in the rooms longer and having fewer services on a daily basis,” he said.

Laschever, for his part, believes guests are more understanding about such things.

“I really do think that there is a shift, especially in younger people these days. They have a little bit more of an earth friendly, environment friendly knowledge. I don’t think it’s nearly as unusual to say ‘look I don’t want to waste anymore so don’t clean my room.’ I think people are really much more aware of that and okay with that,” he said.

Engelhardt, however, again reiterated that there will be a need for a correction when it comes to services while touching on some of the labor challenges.

“There’s also the reality that a lot of these lost services are driven by an employee shortage and expectations are going to rise. If you have a Courtyard they [guests] want the Bistro open all day. They want breakfast, lunch, and dinner and currently we just do breakfast. Those types of things that we’ve cut because we can’t hire people are going to have to be addressed at some point and most likely to hire to those people we’re going to have to pay more,” he said.

Looking ahead, the panelists were all bullish on the industry despite some of the existing economic headwinds.

“I’m very optimistic. I think from an economic standpoint once we get past the midterms the news will get much better all of a sudden. I’m not really concerned about a recession. There’s more work right now than we can do and we’re booked that way through 2023. So I think it’s going to be a better year and sort of a refresh year,” said Engelhardt.

“I think things will definitely keep on picking up,” added Blank.

Credit

Dennis Nessler

Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.