When Cicero talks, I listen

Three Rules of Renovation

Lodging’s current robust performance is creating a competitive environment when it comes to product freshness. The industry fundamentals have never been better, and these conditions are driving a flurry of construction projects, rebranding and conversion activity, and renovations of every scope throughout the United States.

In the last three years, an estimated 1.2 million hotel rooms have been renovated, representing more than 20 percent of the existing supply, Lodging Econometrics (LE) data reveals. According to Bruce Ford, LE’s senior vice president and director of global business development, the number of renovations will likely trend downward as strong hotel operating profitability discourages owners from making rooms unavailable while being renovated. However, for those hoteliers willing to take the plunge and make some upgrades, here are some key takeaways for making the best renovation decisions for your bottom line.

Rule No. 1: Property Improvement Plans Are Never Cost Neutral
When Cicero’s Development Corp. gets involved in a hotel renovation project, it typically starts with a call from an owner who needs to conduct a property improvement plan (PIP). During the conversation, they discuss the budget and scope of the project and how they can align with the owner’s business plan. “In all cases, we say, ‘Give a range of prices you want us to fall in between,’” says founder Sam Cicero. “It has to be a conscious business decision.”

An effective PIP should help a property gain market share, increase guest satisfaction, drive revenue performance, and enhance profitability, according to HVS. When determining where to direct capital investments, owners focus on areas that will drive a considerable return, and whether that means tackling a guestroom refresh, an FF&E renovation, or a complete revamp of the public spaces depends on a variety of factors, including a property’s performance in the market, where it is in the life cycle, and whether it is in the process of repositioning or rebranding.

PIP projects should always start with design professionals, Cicero stresses. “That’s the part owners skip over—just go to the flag and get whatever they recommend. But, if they go this route, by the time they get to the end, they’re usually over budget. You want to take what the flag wants them to do and make it fit the budget.”

The best way for owners to prevent spending excesses is to get a good general contractor involved in the project early, Cicero explains. “Contractors will watch the purse strings and timeline and get whatever professionals involved that they need. You want to maintain the design, watch the budget, and do whatever you can to increase the property’s sustainability.”

Last year, Cicero’s completed a multimillion-dollar renovation of more than 25,000 square feet of meeting space in the DoubleTree by Hilton Hotel Chicago–Oak Brook. The refresh included a new look for the grand ballroom, in which the team changed out 469 incandescent downlights with 407 energy efficient LED fixtures and installed a dimming system. They also removed more than 100 fluorescent ceiling fixtures and replaced them with 15 larger hybrid LED chandeliers. “They got savings, and it was better for the environment,” Cicero says. Since the hotel is located near many corporate offices, Cicero’s also made changes that would better accommodate business travelers. These included converting the hotel’s Wine Den bar and restaurant into a meeting facility for hosting intimate to midsize events. The gut-job involved installing new ceilings, energy-saving lighting, wall finishes, and trim. They also mounted glass doors to provide easy access to the 1,500-square-foot outdoor deck.

To accomplish the owner’s end goal, renovation experts must consider a variety of factors, such as how the project will save owners money or how to meet brand standards without going astray. It’s also smart to leverage the existing asset to emphasize the hotel’s strengths. Owners with one or two hotels can sometimes lose track of the big picture, Cicero says, which is why it’s important to get the right parties involved to steer the project in the right direction. “If you are making decisions solely on your budget, you may be making cuts on quality that will inhibit your ability to sell the property down the road,” he says. “If it costs more than you have right now, phase the project so you can do what you want in the confines of your budget.”

Rule No. 2: It Never Hurts to Plan for the Future
Technology is always speeding forward, and hoteliers must constantly adopt and deploy new innovations to keep guests connected during their stays. Flat-screen HDTVs with streaming capabilities, convenient plugs for gadget charging, and fast, reliable Wi-Fi are just a few of the tech must-haves on travelers’ lists. As hotels tackle full-scale renovations, technology is hard to ignore, especially given the big payoff it can yield in customer satisfaction.

Top hotel tech priorities in 2015 include customer-facing mobile solutions (39.5 percent), adding bandwidth (37.8 percent), and preparing for changes in payment technology (28.7 percent), according to Hospitality Technology’s 2015 Lodging Technology Study. Survey respondents also identified securing data, migrating to the cloud, leveraging mobile solutions for employee-facing applications, and developing a digital strategy as key priorities.

When The St. Regis Monarch Beach in Dana Point, Calif., began a $30 million renovation of its 400 rooms and suites in January, enhancing in-room technology was a central focus. New communication panels keep the entire resort connected by providing guests with one-touch access to services including housekeeping and valet. The installation required hardwiring throughout the resort, but renovating two floors at a time minimized disruption, says Chris White, area director of sales and marketing for Southern California at Starwood Hotels & Resorts Worldwide. Other upgrades included Bluetooth-enabled alarm clocks and flat-screen smart TVs, which can be synced with guests’ devices to stream movies and play music. “Investing in technology is essential in today’s luxury hospitality environment,” White says. “Our guests expect to be connected when they travel on business and for leisure, and these upgrades will do just that.”

For connectivity to be effective, it must also be convenient, which is why Eventi, a Kimpton hotel in New York City’s Chelsea neighborhood, recently added a Business Bar. Forgotten chargers and heavy laptop bags are no longer a problem for guests, who can loan an array of devices and accessories, including computers, iPads, eReaders, digital cameras, headphones, and chargers, at no cost. Free Wi-Fi access allows guests to use the devices with ease for the duration of their stay. The project required minimal investment to purchase the devices, and the property has received positive feedback from guests thus far, says Shannon Spillett, director of New York City marketing and development marketing for Kimpton Hotels & Restaurants.

“In an era when the next big tech invention seems to arrive every week, we recognize that our guests require us to stay on trend,” Spillett says. “We know that traveling can take its toll and sometimes leaves us vulnerable, without the comforts of home. These comforts increasingly fall in the technology category, so we make every effort to ensure that our guests have convenient access to the latest tech amenities and services.”

Rule No. 3: A Sustainable Approach to Design Will Save You Money
rom water-conserving fixtures to efficient LED lighting, sustainability initiatives not only allow hotels to be more environmentally responsible but also have the potential to dramatically cut costs. That’s why going green is a major focal point for many of the owners currently tackling renovations. According to AH&LA’s 2014 Lodging Survey, 16 percent of respondents planned to incorporate LEED in structural renovations over the next 12 months, up from 13 percent in 2012.

Taking the first steps toward becoming a sustainable hotel and cutting costs doesn’t have to entail an enormous investment or inconvenient downtime. In 2009, Starwood Hotels & Resorts Worldwide set an aggressive goal of 30 percent reduction in energy consumption and 20 percent reduction in water consumption by 2020. In 2013, Starwood added a goal to reduce carbon emissions by 30 percent in the same timeframe. With more than 1,200 properties worldwide under 10 brands, Starwood and its franchisees had a lot on their plates. But by taking a triple-bottom-line approach to sustainability, the company has made significant progress toward its “30/20 by 20” target, says Andrea Pinabell, vice president of sustainability at Starwood. Using 2008 data as a baseline, Starwood has cut energy by 12.1 percent, carbon emissions by 16.07 percent, and water usage by 17.26 percent per built hotel room thus far through the end of 2014.

“Sustainability is not making one big change—it is a lot of small efforts put together,” Pinabell explains. “In everything that we do, we look at the environmental impact, the community impact, as well as the financial impact. We look for changes that will reduce our energy and water consumption, decrease our waste production, but also provide value to our ownership.”

Ongoing foundational initiatives consist of small, no-or low-cost changes—such as installing LED lighting and low-flow fixtures—that have a return on investment of about a year or less. These foundational initiatives are projected to save $1 billion throughout the system in fewer than 10 years. Bigger capital investments involve large-scale renovations, such as mechanical equipment and irrigation improvements, as well as adopting renewable energy sources, like solar. To offset some of the costs of these big-ticket items, Starwood leverages business partnerships that will incentivize owners.

The 873-room Westin New York at Times Square is among the properties in the Starwood system reaping the benefits of sustainable renovations. In 2011, the Westin became the first hotel in the state of New York to receive a silver certification from Green Seal, a nonprofit environmental standard development and certification organization. In June, the hotel completed a three-year, multi-phase, $33 million renovation that tackled all aspects of the property. Energy conservation enhancements included installation of two energy efficient chillers, four heating boilers, and a temperature monitoring system. Movement-activated lighting and LED lightbulbs have cut electricity costs, while low-flow toilets and faucet aerators have reduced water consumption. The 6,000 LED lights that were installed throughout the course of the project translate into an overall reduction of energy consumption by more than 30 percent. Once four more separate LED lighting projects are complete, it will result in an additional $250,000 in savings in less than a year.

Starwood may be cuttings costs and carbon emissions with foundational changes, but Berkshire East Mountain Resort in Charlemont, Mass., is seeing big results in having an on-site solar farm and wind turbine. The rotating solar panels, which track the sun throughout the day, were installed in 2012, allowing the ski resort to run entirely off renewable energy. By making this move, the resort was able to lock in a price for electricity and avoid rising costs.

“Not only is it extremely logical, from a business standpoint, to have renewable wind and solar, but it has also helped develop great customer relationships,” explains Resort Manager Jon Schaefer. “It’s certainly boosted our business.”