Blog Category: Renovation

As Rhonda Rasmussen, Raj Chandnani and I prepared for the St. Regis Princeville Resort Kaua'i Grill grand opening last week, I was excited and looked forward to coordinating two separate gala events.

The first occurred on Thursday, November 19th. This was the grand opening of the Kaua'i Grill Restaurant which included media, clients, regional representatives, and of course world renowned chef Jean-Georges Vongerichten who was on Kaua'i to train his staff to present his famous cuisine. We spent several hours prior to the event making detailed lists, photographing the entire fine dining restaurant, and noting adjustments that needed to occur.

After adding a few final touches, we got ready and joined close to 100 guests for a cocktail event to introduce and showcase the restaurant. We learned first-hand the difference between Kaua'i's "resort chic" wear and our own interpretation of it. Let me tell you, our group was in the minority.

Friday began with a "meet the press" breakfast where Rhonda spoke to the history of the renovation and the local stories behind the artwork chosen and displayed throughout the space. Once again we spent time to “set the mood” for the evening’s event which would be more elaborate than the previous.

That evening, champagne was served outside while we watched a breathtaking sunset. Inside, I experienced several different perceptions of the design of the restaurant and the local community’s view of the third renovation of the Princeville property.

Media representatives from Food and Wine, Travel and Leisure, and Forbes magazines, and several local Hawaiian publications stopped by many times to give their feedback on the resort, take pictures, and interview our team on our design vision. Comments were extremely positive and reinforced how appropriate the design was to Kaua'i, its people and culture. The general consensus was that WATG's vision and execution kept the focus on the views and the island's culture.

Although this was a social event, it represented another aspect of a designer's job description:  to continue to sell our product and hospitality expertise beyond the drawing table. Each of us were seated with a different group of people by the event coordinator to ensure we were mingling and getting the most out of the evening (I have a strong feeling Raj was most responsible for this mandatory interaction!). It worked. We not only met with the media but we also got to interact with the local community. I met with the local restaurant owners of Hanalei Dolphin Restaurant, who have both lived in Kaua'i since the early 80's. They both expressed that the St. Regis in its recent incarnation was the best they had ever seen the resort. The evening ended with speeches given by both the general manager and chef Jean-Georges who gave kudos to our team.

After all the interviews, tours, and reviewing the entire property we left with a great accomplishment for creating a space that paid homage to the local culture and maintained what our company stands for: creating luxurious, comfortable destinations while maintaining the thoughtfulness and genuine aesthetic that complement the local culture and environment.

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.

Act now.

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.