One of the biggest challenges for PIPs and renovations right now comes down to aligning project costs with scope. “It’s difficult to always put your thumb on what pricing for specific products will be in today’s market and then in the future, so it’s important to layer into your budget a reasonable contingency,” Pinheiro said.

However, in the short term, he believes some brands will be more willing to negotiate on PIP terms in an effort to get hotels updated sooner rather than later. “We have also seen some brands offer key money if we’re able and willing to complete specific brand initiatives by certain dates,” Pinheiro added.

He also noted that the decision to complete a renovation happens on a case-by-case basis. “In markets that are starting to gain traction again with corporate and group business returning, this could be ideal timing to complete a PIP or renovation to not displace business in the future at greater [revenue per available room] levels.

“I would prefer to displace that business now before occupancy and [average daily rate] has further recovered,” Pinheiro said.

Brand

For Extended Stay America, which counts more than 700 hotels in its portfolio, PIP and renovation requirements were relaxed during the pandemic, according to Andy Stull, senior director of franchise services. However, the extended-stay brand is now moving to a more traditional standard of requiring PIPs at conversion, change of ownership and major milestones.

“Our PIP requirements focus on improving the guest experience while not requiring owners to invest money in unnecessary standards,” Stull said, adding that PIP requirements that focus on improving the guest experience are important to keep the brand value proposition strong and to improve a hotel’s market share. As for the biggest challenges regarding PIPs and renovations, Stull said it’s all about inflationary pressures, the cost of financing and labor shortages.

As of press time, the inflation rate was 6 percent, according to the U.S. Inflation Calculator. While that’s down from the 8 percent average inflation rate in 2022, it’s still a significant figure that continues to put additional pressure on spending power. Average prices for U.S. construction materials grew 16 percent in 2022, according to the “2023 U.S. and Canada Construction Outlook” report from JLL.

“We are finding that owners who are diligent in working with general contractors and subcontractors are able to complete projects in a timely and cost-effective manner,” Stull said.

At the end of the day, renovations are still essential to helping owners position their hotels to gain market share. “After completing a renovation, these hotels are able to differentiate themselves, compared to competitive set hotels that may have deferred renovations over the last three years,” Stull said.

Operator

Matt Barba, chief operating officer at Charlestowne Hotels, said the management company has seen an increase in the number of hotel brands requiring PIPs in recent years.

“This trend reflects a desire by many hotel brands to update and modernize their properties to meet evolving guest expectations and remain competitive in the marketplace,” he said. “PIPs are the tool used to improve the guest experience with updated amenities, technology and design elements.”

Barba said it’s important that the hotel industry starts back up with PIPs as the pandemic has subsided in order to provide a competitive advantage and encourage innovation. “For some, it is simply to maintain a brand standard and make up for lost time. For us, improvement projects are an opportunity for hotels to innovate and experiment. It’s an opportunity for us to test new ideas and stay ahead of industry trends,” he added.

While there are certainly challenges to renovating right now, Barba noted that there are also many opportunities. Those include upgrading technology, especially as the pandemic accelerated tech adoption across industries. “Renovations that focus on upgrading in-room technology can help meet guest expectations and enhance the overall guest experience,” he said.

Focusing on key opportunities can improve a hotel’s market position, giving the property an opportunity to stand out in a crowded market, he added. As a result, revenue can increase over the long term.

“With travel on the rebound and unprecedented rates, there is an increased demand for high-quality accommodations that offer a memorable guest experience,” he said. “Renovations that focus on enhancing the guest experience, such as upgrading room amenities, adding experiential features or improving dining options, will help attract and retain guests.”

Written by: Alicia Hoisington. Read full article here