Hotel brand executives are aware that travel is back. Hotels are routinely posting higher rates than before the pandemic, with some markets reporting rates higher than in 2019. These trends bode well for the industry, but increased revenues also mean that brands are starting to expect their franchisees to start reinvesting in their properties. The added pressures due to higher rates, and capital expenditure deferrals due to the pandemic, are also having an impact on expectations, which guests are acknowledging on social media outlets.
As brands push for capital investments, guests also are demanding higher levels of service. This challenge is real, and hoteliers are going to have to be ready to fund this requirement as part of the natural cycle of the hotel investment. While hotel owners are still concerned about market uncertainty, the timing to start reengaging in the process should be on their radar.
Travelers acknowledge on some level that inflation is having an impact on prices, as the cost of hotel operations must be supported to provide consistency, but guests are also looking very closely at hotel presentation. Time leads to wear and tear, and hotels across the industry are behind on their renovation schedules. Guests are quickly taking notice.
Some brand executives also feel that they may have been too lenient with the franchisees, providing too much time or reduced brand standard requirements. The delay in property improvement plans (PIPs) from the beginning of the pandemic to today is one of the longest in recent memory, as no one was aware of when the market might rebound. Now that it has, brands are committed to getting their properties back onto a consistent property improvement schedule to meet the brand quality assurance standards.
Owners should reach out to their brand partners and come up with a plan to address property improvement plans as soon as possible. Communication will be a necessity when navigating this process, so it pays to start early. Here are just a few things owners need to know when executing on PIPs in today’s market:
What Is a Priority?
Hoteliers must ensure they are on the same page as their brand when outlining PIPs, as a great deal has changed since the last time these improvements were brought up. This will require looking at your hotel’s current and projected revenue stream, and clearly outlining each of the areas in need of a refresh. It’s easier to justify the investment in an updated property when all parties are fully aware of what must take place, and how much it may cost. It’s important for hoteliers to show their brand partners that they are making progress on this front, and to ask for support wherever it is needed.
Who and What Is Available?
Hotel owners should also speak with potential designers and construction partners as soon as possible, as the availability of labor varies based on their timeline. While materials and shipping prices have stabilized, all have not necessarily come down due to lingering disruptions in the supply chain. As a result, hoteliers should inquire with brands about their flexibility with regard to some materials based on availability and price. For those obligations that must be met, hoteliers should speak with development partners to understand what options are available and what they can prioritize.
What Will Improve Your Hotel’s Value?
Aesthetic improvements to hotel guestrooms and public areas are the fastest ways to increase guest satisfaction scores and rates, and therefore the overall value of the property. While hotel development is still ongoing, a wave of acquisitions typically sweeps across the industry as travel recovers, and keeping up with PIPs is one of the most reliable ways to increase the value of a hotel asset and position. Hotels willing to go further by adding additional revenue-generating amenities can increase this value further as well.
Hotel construction is still taking place. Even as rates continue to climb and the cost of materials level out, new supply is preparing to enter most major and secondary markets. When it does, hotels that have not kept up with their PIPs will find themselves unable to continue pushing rates the way the rest of the industry has, and it will be time to catch up.
Stephen Siegel is principal of H-CPM (Hospitality CPM).
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.