Blog Archive: August 2009

When times are good, hotel owners don't want to impact revenues by taking rooms out of circulation and embarking on a renovation program. Paradoxically, today, poorly performing properties in need of a facelift lack the necessary revenue to do anything about it.

Alas, a Catch-22: If your property is making money, you don't feel the need to renovate.  But when occupancies are down and you feel the need, you don't have the money to renovate.

So, when is a good time to renovate?

John F. Kennedy once said, "The time to fix the roof is when the sun is shining." In terms of the economic climate, these are cloudy times at best (even stormy, in many locations). So, what can a hotel owner do today who is strapped for cash?

Find some money. Invest in capital expenditures and make decisions with an eye on ROI.

WATG has coined the term "RevPAD" to refer to the impact that creativity can have on a hotel's top- and bottom line: Revenue Per Amazing Design.

The most obvious advantage of renovating in this environment is cost savings. Now is the first time in the 30 years I've been in the business that construction costs have actually come down. Historically, they have gone up steadily, if not sharply. Today, in many parts of the world, costs are down by over 10% from just six months ago. According to statistics compiled by Rider Levett Buchnall, construction costs in cities like Denver and Seattle declined by as much as 8% in the first quarter of 2009 alone.

A second advantage: When business is slow and occupancies are down, there is less disruption to guests and less impact on cash flow from operations. On top of that, construction can proceed more quickly, and property owners can get the word out that their hotel is newly renovated and open for business.

Properties that have been newly renovated will be in the best position to restore and/or raise rates and increase occupancies. Hotels that defer needed maintenance and refurbishment and wait until times are better will miss being able to take full advantage of the inevitable upturn.

When planning a trip, travelers seek out hotels and resorts that are either new or newly renovated. Data from a study conducted by STR and Hospitality Advisors LLC shows that, over a five-year period, revenues for renovated properties increase at three-and-a-half times the rate of un-renovated properties.

Bottom line: Hard times are good times to prepare for better times.

We have our design ready.

Our cans were just delivered to Pearlridge Center.

Our build team has been practicing all week.

We're all set to go!

If you're in the area, please stop by Pearlridge this Saturday, 15 August, with cans of food and “vote” for our entry by filling our shopping cart. I can’t reveal what we’re building, but I can promise that it will be uniquely Hawaiian.

I would like to take this opportunity to thank the many companies for supporting our team and making it possible for us to participate in this event benefitting the Hawaii Food Bank :

  Ayson HI, LLC
  Bays Deaver Lung Rose Holma
  The Chong Group LLC
  Design Studio
  Orient Travel, Inc.

And special thanks to Safeway for their tremendous support!