There are many smart reasons why now is the right time to renovate your hotel, including today's historically low interest rates, relatively inexpensive material and labor rates, and continuing strong travel trends.
There is no question that renovating your hotel is a major investment, and is certainly not a decision to be taken lightly. So how do you know if the time is right? Here are some clues:
Are you feeling pressure from a flag to perform a delayed Property Improvement Plan or "PIP"? It is your responsibility to keep the hotel in compliance with all existing and new brand standards. Many franchisees were not required to invest in a PIP during the recession but that has changed as business conditions have improved.
What is the physical state of your hotel? Does the outside facade invite guests in when they pull up? Are the guest rooms and furniture out-of-date? Is the paint or wall coverings fading? Are the bathrooms worn looking?
Are new hotels are being built in your area? Is there new inventory in your market? Are your competitors renovating their hotels? Let's face it: why would guests want to stay at a hotel in need of renovation when they can get a brand new hotel with the very latest amenities for the same price?
What are your guests saying about your hotel? Guests are your biggest and best critics. For unbiased opinions check your hotel reviews on tripadvisor.com, oyster.com or other travel sites. Are they telling you it is time to renovate?
INTEREST RATES: Here is another factor to consider: Economists now say that a rise in interest rates may be in the cards sooner than expected, and it is set to affect the fortunes of business borrowers across the country when it happens. Few hotel owners finance a renovation themselves; instead, they rely upon a bank for a loan. For a $500,000 loan with a 30 year term, the cost of an increase of one percentage point can add up to $215,000 to payments over the life the loan.
MATERIAL & LABOR COSTS: Material costs are a major part of every renovation. Prices recently posted a modest uptick, according to Engineering News-Record, but remain slightly below last year's average prices for steel, lumber, drywall, pipe and concrete. As construction continues to pick up, however, both material and labor costs are expected to accelerate sharply higher. Year to date, cost of construction, common labor and wages-per-hour are all up over three percent.
DEMAND IS GROWING: Finally, there is this: According to a new Lodging forecast released by market research group PwC US, hotelers can anticipate stronger occupancy gains in 2014, setting the stage for 2015, during which PwC US anticipates the highest occupancy levels in 20 years. Industry-wide occupancy levels are expected to reach 64.8 percent in 2015, the highest since 1995, giving hotel operators more confidence to push for higher room rates.
Cicero's is in the business of making hotels better. Call Sam Cicero, Sr. at 888-904-0141 to discuss how a Cicero's renovation will build your profits today and have you ready for growing demand tomorrow.