A compelling reason to renovate now is that construction prices have declined significantly following a 30-year rise. Saving money in labor and materials can increase the internal rate of return for any hotel renovation projects that are being contemplated … and have bottom-line benefits. But, as they say on TV, "Hurry, this offer won't last."
As reported in Rider Levett Bucknall's quarterly cost report, construction costs in the US declined for the fourth consecutive quarter, but the rate of decline has diminished considerably. Whereas in the first quarter of 2009, prices dropped in many cities by an average of seven percent, recent reductions in labor and materials (as well as overhead and profit) have leveled off to a single percentage point.
The data suggest that builders are unlikely to make additional deep cuts to their already tightened margins, even as workload projections remain pessimistic. In other words, if you're a hotel owner, operator or asset manager who has been deferring maintenance or waiting to renovate until prices go down even further, this is as good as it's going to get.
Howard J. Wolff Hotel News Now Interview "Should hoteliers renovate"
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