By Sam Cicero, Jr.
In 2015, owners of hotels in the United States spent a record $6 billion on capital expenditures, including renovations. This compares to $2.7 billion spent in 2010 as the industry climbed out of the Great Recession. Needless to say, hotel renovations are on the upswing.
If you are a hotel owner or operator, balancing the need for cash flow with renovation objectives can be difficult. Often it leads to one of the most crucial decisions made during renovation planning: Should we keep the hotel open or should we close. The answer lies in the scope of the project plus any role seasonality plays in the business, among other factors.
On one side of the ledger, closing the hotel makes good sense. It allows for a far broader scope so that more can be done in less time. A major build out, for example, of a new spa, restaurant or ballroom, can be completed on a fast track schedule without concern for subjecting guests to noise or other distractions. Also, time sequencing is more flexible for trade people to schedule work. Finally, if the hotel sees key occupancies during the winter months, i.e., a ski resort, closing down over the summer will not greatly impact revenues. Or vice versa for a hotel that counts on summer visitors for the bulk of its business.
The key negative of closing up a hotel is that cash flow comes to a screeching halt. In these heady days of buy-outs and acquisitions, hotel owners often can't afford to not maintain a certain level of revenue to make loan payments, so this may not be a realistic option. In addition, long-term employees must be put on paid leave. Also, a hotel that is closed for an extended period can be forgotten by guests. Occupancy seasonality for most hotels doesn't fluctuate greatly over the course of a year so the example of a ski or summer resort likely won't apply.
Keeping a hotel open during renovations is the smart move for the average hotel owner. However, it takes a special breed of renovation contractor to pull this off. The contractor must be highly experienced in the time sequencing of demolitions, deliverables and sub-contractor schedules. They need to show a unique sensitivity to guest needs. The fact is, guests expect a certain degree of comfort and relaxation when they stay at any hotel. Noise, dust and busy contractors roaming the hallways can be a perfect recipe for guest dissatisfaction.
For nearly half a century, Cicero's has practiced the art of renovating high-occupancy hotels. Our project managers are expert planners who know to avoid disturbing guests by using floor-by-floor renovation scheduling to buffer noise. We go out of our way to ensure guests do not see construction debris or our contractors coming and going. Stealth renovations are Cicero's speciality, whether it is PIP "refresh" or complete demolition. Give us a call to discuss your next renovation project.
