GLOBAL REPORT—There is a rush to renovate in the hotel industry. According to one estimate, last year owners of hotels in the United States spent a record $6 billion on capital expenditures, including renovations.
The study from Bjorn Hanson, clinical professor at the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, said last year’s capital spending was a record and an increase of 7% over 2013. Renovation activity in hotels quickly climbed following the end of the recent recession. In 2010, owners of U.S. hotels spent $2.7 billion on capital projects, and the expenditures have risen steadily since then.
“A lot of projects got deferred when the economy wasn’t good and the brands weren’t pushing (property improvement plans),” said Warren Feldman, CEO of Jonathan Nehmer + Associates, a Maryland-based interior design, architecture and project management company. “That’s changed, and the brands are now insisting these projects get done.”
In planning and executing renovation projects, owners, operators and contactors need to balance the needs of hotel operations and guests with the goals of the projects. One critical decision is whether to close a hotel during the project. The answer often depends on the scope of the project, sources said.
“Basically, we never close a hotel during a renovation,” said Jay Litt, executive VP of Waramaug Hospitality Asset Management, an investment group specializing in acquiring, renovating and repositioning hotel assets. He said the company has done more than $50 million in renovation projects in the past few years. “Maintaining revenues for the hotel is part of the acquisition process, so closing it doesn’t make much sense. And our renovations are mostly superficial rather than invasive.”
To close or not to close
Whether to close during a project requires an analysis of business patterns, revenue needs and other considerations, Feldman said.
“The question comes up frequently, and we sit down with our clients to analyze what makes the most sense. But in this current market, it’s unusual for (an owner) to close down a property,” he said, adding that special situations sometimes make it possible.
Feldman’s company recently did a renovation at a luxury ski resort hotel in Colorado, and to execute the project the hotel closed temporarily between the winter and summer seasons.
“In a market with a true dead zone, where you can pick up huge chunks of time by closing the hotel, it’s something we will consider,” Feldman said. “In this case, we shut down for the ‘mud season’ so we could crank out as much as of the work as humanly possible so we were able to open some floors (of the hotel) by summer. No matter what, however, everything had to be 100% complete by ski season.”
At Red Lion Hotels Corporation, the decision of whether to close a hotel during a renovation is largely a financial one, said Richard Gleave, VP of real estate, design and construction. Gleave is overseeing 12 renovation projects in which the properties will remain open during the work.
“These hotels all have revenue budgets to meet, so we need to create the minimal amount of impact while we’re improving the product,” he said. “Every hotel has a seasonal aspect to it, so we sit down with each local hotel team to do a displacement analysis on what impact the renovation will have. We pick times for our schedule to revolve around natural periods of lower occupancy.”
He said in most of the company’s hotels there is a slight downward business trend near the end of summer, which gives them an opportunity to take rooms off the market for renovation.
A case for closure
Executives at Destination Hotels & Resorts, operators of the La Cantera Hill Country Resort in San Antonio initially planned to keep the property open during a planned renovation.
“Initially, the scope of the project wasn’t as big as what it materialized into being, so we thought we could keep it open,” said John Spomer, the hotel’s VP and managing director. “But once we took a broader view of the project and did time sequencing, we realized doing the job in clusters would have protracted the entire transformation into a couple of years. That would have been untenable for both our guests and the associates who would be working in this environment.”
The property will reopen 6 April following a 17-month renovation that touched nearly every aspect of the hotel, Spomer said. All public spaces will be redone, with a number of additional facilities added, including a lobby bar and new restaurants. Outside, the hotel’s family and adult pools were redesigned with additional food-and-beverage options.
Included in the project is a new 10,000-square-foot ballroom and adjacent breakout space. In late February, construction began on a 17,000-square-foot spa.
Spomer said the property’s 353 full-time employees have been kept on the payroll during the closure and renovation process.
“There are some things for them to do as part of the project, and we’re doing some retraining, but many of them have been and will be on paid leave until we get closer to the reopening,” he said. “We have a lot of long-term associates we didn’t want to lose. They know the resort and have a great affinity for it.”
Keeping open can prove challenging
Keeping a hotel open during a renovation project presents a variety of operational, service, logistical and marketing challenges.
Feldman said that in an ideal renovation situation, multiple floors in a hotel are closed and available for work by contractors. This reduces noise and disturbance to guests and creates the most efficient work patterns, he said.
“This way, workers specializing in demolition work on one floor and when finished move down to demo rooms on the next floor. In the meantime, painters work on the floor that was demolished and then move down,” he said. “In higher-end properties, you might want to put a buffer floor between guests and construction. In that case, you’re looking at two floors of construction plus a buffer floor. Once you start moving down the levels of the property you need a buffer floor above and below so you have four floors out of service at the same time.”
Since mechanical and plumbing systems are typically stacked from top to bottom in a hotel, work on those components often means taking out stacks of rooms instead of floors, Feldman said.
“This can be extremely problematic because then you might have guests staying on each side of the rooms under construction,” he said. “It become much more of a logistical conversation in which you have to look at the layout of the hotel and figure out what works best to do that.”
In planning an extensive renovation of the Marriott Hotel Park Lane in London, the operators believed they could keep the property open with minimal impact on guest stays. The three-phase project, which is scheduled for completion in June, includes refurbishment of meeting rooms, public spaces and guestrooms in the 152-room property.
“It was crucial to keep noise levels to an absolute minimum, and we managed this carefully to avoid guests being disturbed during their stay at all costs,” GM Nicolas Kipper wrote in an email. “No more than two walls on each floor required demolition, which was done between midday and 6 p.m. when guests were most likely out of their rooms.”
Kipper said he has used the renovation as an opportunity to communicate with guests and associates. Customers have been invited to the hotel during the project to see the progress and see a sample renovated guestroom.
Read more: “Tip off guests to renovations before check-in”
“We realize how important it is for the staff to stay engaged at every stage of the renovation,” Kipper said. “Myself and the director of operations got involved in the last room demolition to take down walls and rip up carpets. We also held a series of staff parties to celebrate key milestones of the renovation and organized a staff fashion show, with professional hair and make-up artists, to welcome our new uniforms.”
Gleave said communication with guests is the best way to avoid complaints and bad experiences.
“There can’t be any secrets about what (guests) are coming into. You can’t catch people unaware, so it’s important to communicate as much as possible to let them know what’s going on,” he said. “Once we know what the renovation schedule is going to be, we put together marketing materials (operators) can post in the lobby, plus we provide conversations employees can have when people check in.”