LOS ANGELES — With more hotel owners facing brand-required renovations this year, there will be a lot of construction projects to manage.
Hospitality Ventures Management Group sees that as a chance to grow.
The Atlanta-based third-party hotel operator and investor has a new venture, Elevate Renovations + Development, to act as a third-party project manager and asset lifecycle services provider for hotel owners preparing for property-improvement plans or those considering hotel acquisitions and dispositions.
Even since its start, HVMG has had its own design and construction department that has focused on its own portfolio. In recent years, though, the company has explored renovating properties it doesn’t own or manage, said Suzanne Saunders, chief elevation officer at Elevate and senior vice president of design and construction at HVMG. In January, she signed a project management agreement for an Autograph Hotel in Orlando.
“We are opening ourselves up for the rest of the hospitality industry and taking our services to other ownership groups,” she said. “We can do the whole [property improvement plan]. We can do part of the PIP. A la carte or the whole thing.”
Third-party project-managing another company’s hotel isn’t a new concept, she said, citing McKibbon Places from McKibbon Hospitality and Ground LVL by HEI Hotels & Resorts.
It’s another way to offer HVMG’s services and expertise, she said. It’s also a revenue generator.
A hotel owner approached HVMG in 2023 about some project management opportunities, Saunders said. HVMG had managed some of the owner's hotels and completed multiple PIPs or renovations before, but these two were for projects HVMG didn’t operate. Over the course of last year, HVMG oversaw work at a Residence Inn in Kingston, New York, and a Fairfield Inn in Savannah, Georgia.
“We’re like, wait a minute, why don’t we take this opportunity to open it up and offer our services?” she said.
The HVMG team had to figure out exactly how this would work, Saunders said. The team discussed different options and landed on Elevate being an endorsed brand by HVMG. That allows it to still have the depth of what’s behind HVMG in making deals, holding brand relationships, negotiating PIPs and having food-and-beverage support for concepting restaurants.
Elevate sees opportunities to work with owners who don’t have in-house project management services, Saunders said. Even if they do have in-house, Elevate could still work with them if requested, particularly on smaller projects. It can also handle the due diligence for a hotel owner looking over a hotel for a potential acquisition, looking over the building systems, infrastructure and anything else in the walls.
“Some people might want to just supplement that out,” she said.
There’s no plan for a set number of projects to do each year, she said. The goal is to grow it organically, building on the relationships it has with players in the industry. She’s still overseeing projects for HVMG as well.
“I think that there are opportunities for us to be able to bring our expertise to other ownership groups and help them in an efficient manner, on budget and on time,” she said.
Saunders said she’s come off about $26 million worth of renovation projects over the last 18 months with HVMG. She has three in the works at the moment, but there are many she’s tracking that may transact, leading to new renovation work.
Saunders has been working on a lot of PIP budgets lately. Last year, she did 48 with Michael Woodward, HVMG’s executive vice president and chief growth officer, to see if deals would pencil. She has about 20 hotels in HVMG’s portfolio that will go through their cycle renovations in 2025 and 2026.
Labor is more expensive, and when budgeting for a new renovation project, Saunders said she would add 10% to 12% as a line item for inflation. Even so, the only thing to do is go out and bid competitively for the work. Instead of having three, she may go five deep with a general contractor.
“The market is going to tell you what it is,” she said. “You can’t argue with it.”
Hotel ownership groups want HVMG to go a little deeper with the bench of people brought to the table, she said. Some deals right now are smaller in scope, so owners can’t afford a larger general contractor with all that overhead. That means getting creative and finding smaller contractors who can help keep costs down.
Some hotel owners are asking to hire local to avoid having to house the crew in a hotel and further displace revenue, she said.
Prior to the pandemic, during a $15 million to $20 million renovation of a full-service hotel, the project managers essentially had to just stay under budget, Saunders said. The budget had ownership approval, and they typically left the project managers alone.
“Now, we’ve got owners who are really going into every single one of my line items and they’re like, ‘No, we really need you to save money here,’” she said. “Everyone is really watching how they spend money.”
Before HVMG and Elevate, Saunders worked for Hyatt Hotels Corp., and she said that gives her insight to what the brands want out of a property-improvement plan. It also means she knows where they can work out compromises.
“If we go to an owner or to a brand and say, ‘Look, I’ve only got $5 million and you know this PIP is really $6 million, help me decide where we’re going to spend that money,’” she said. “We have a good relationship with the brands where they’ll work with us. They know that if they give us a little bit of leeway, that we will turn out a great project for them and a great product.”