Following two years of high and rising federal interest rates, the U.S. Federal Reserve cut its rates back by 0.5 points, setting in motion two years of pent-up hospitality development and renovations.
This is an exciting time to be a hotelier or hotel developer, but if one fails to pay close attention to how the market is evolving, they could be swept away in the frenzy and out of pocket during the most crucial moments. With such a flurry of activity, it can be easy to be left behind without proper planning.
Development activity will escalate across hospitality development over the next few months. Skilled labor, which is already difficult to come by, will quickly dry up in many markets. Materials will go back on a wait list. Brands will tighten their grip on properties behind their product improvement plans. And timelines will continue to march on.
While hotel owners might not be ready to jump into a new project, there has never been a better time to update your plans and speak with development partners to plan for the months and years ahead. The best plan of action is for any hoteliers hopeful to get to work on new projects this year to start early — in fact, start now.
Building momentum
Hoteliers may need to approach all of their old projects with fresh eyes as expectations or requirements for development goals left on the back burner may have changed. Start by understanding the level of a project today, not when it first started. Determine the property type and who is taking the lead, then build a team around those parameters.
These activities can take time. Plan to reach out to design and development partners as much as three to four months before a project begins. Giving development partners time to think about a new project is invaluable, and it allows them to build their team around your specific needs.
The landscape of available contractors has also changed dramatically over the past few years. Hotel owners should consider the location of a project and the number and skill of the contractors available in each region. The success of many projects over the next few years may hinge on their ability to find skilled workers specializing in specific trades. Gathering these experts may take extra planning and preparation. Lead time can help project organizers clarify if they have the capacity to take on new projects and can help prevent last-minute scrambles to locate necessary talent to fill gaps in contractors or development teams.
Hotels require a partner who can help them plan their build from design to opening. They need a team that appropriately assesses the scope of a project — from simple property-improvement plans to ambitious renovations designed to overcome competitors — and adjusts their approach accordingly. The right partner should also help owners identify realistic timelines and budgets for projects in the pipeline and help bring focus to priorities in the short term.
Starting over
Sometimes, the best thing an embattled hotel project can do today is start over with the right priorities. In fact, if your budget is over two years old, you must completely reevaluate the scope of your project with a fresh set of eyes.
Properties that have deferred property-improvement plans or other development goals for two years or more have more wear and tear than others from daily operations. The last thing a hotel owner wants to see after a complete renovation is worn-out sofas in pristine new guestrooms. While budgets from two years prior may have allowed a property to skirt by without updating furniture, fixtures or equipment, the intervening years most likely used up the remaining lifespan for many of these attributes.
Many factors must be considered, especially for branded properties that have run out of goodwill and need to get some work done as soon as possible. The more elements a hotelier can wrap into a single renovation, the better. Any delays over the past two years may have put your property in the optimal position to update its mechanical systems or PTACs while reworking its visual aesthetic. Owners should meet with design and development partners to see where there is flexibility in including additional projects while rooms are out of service, as doing so could put the property in a better position for profitability.
The most important things hoteliers must consider today are timing their renovation to match their developers’ capacity and finding the right team to manage the project. The timing may be right to start the development process today — make sure the team is right, too.
Brad Czechowski is a project executive and partner at H-CPM, a construction project management firm specializing in property acquisition due diligence, asset management of hotel renovations, repositioning and new construction projects.
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