Improve Profits With Renovation, Redevelopment and New Construction

By Bob Mattler Managing Director, Pace Equity | January 15, 2017

There is a new innovative way to pay for hospitality construction projects: Property Assessed Clean Energy (PACE) financing. PACE, adopted as enabling legislation in 32 states and with active programs in about half of them, is gaining momentum as a flexible, available and creative tool in which to finance almost any technology that saves energy and/ or water. PACE can take the place of expensive loans or additional owner equity to finance construction projects that can be repaid long term from those very same energy and water savings. This article will explain Property Assessed Clean Energy, who pays for PACE, some common building systems ripe for PACE financing, who is using PACE and why. We’ll take a closer look through some case studies how hospitality developers and owners are already taking advantage of this new economic development tool.

What is Property Assessed Clean Energy (PACE)?

PACE offers an innovative, affordable method to help solve the challenges today’s building owners & developers face. PACE uses the financial power of long term energy/water savings to make improvements possible today, while spreading out the costs over a long period, in many instances up to 20-25 years. PACE outperforms traditional forms of financing in many ways:

  • Borrowing is available through non-recourse financing;
  • Replaces more expensive cost of capital;
  • Boosts property value without negatively impacting the balance sheet;
  • Preserves borrowing capacity for other projects or more essential business
    plan goals;
  • Obligations pass to new owners seamlessly when the property is sold;
  • No upfront cash requirements in most circumstances and no out of pocket
    costs.

PACE is a financing mechanism providing the power for building owners to recapture wasted energy and water today. PACE also allows developers to obtain low cost capital for their projects resulting in more efficient buildings, lower operating expenses and a more valuable building.

The Impact of Pace on a Recent Hospitality Project: Midest Westin.

Developers of a new Midwest Westin Hotel chose to incorporate PACE Equity funds into the project’s capital stack. By doing so, plans for the hotel became a reality without adding substantial additional construction cost to the project. The project’s groundbreaking became the first instance of a new development utilizing Property Assessed Clean Energy (PACE) financing.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.