Improved Economy and Access to Capital Make Renovations and Expansions Possible

By Andrew Glincher Office Managing Partner, Nixon Peabody LLP | October 28, 2008

Where the traditional sources of financing were equity participants and banks (which usually required significant equity investment before they would lend money), today we are seeing considerable interest among investment banking firms, pension funds, mutual funds and other entities which have not been as active as the hotel market. But with limited vehicles for delivering the kind of returns they need, these investors are starting to look at hotels as an opportunity with great potential.

These new sources of capital are coming onto the scene at a time when property owners have greater demand. Occupancy rates are up, revenues per available room are up, income is up and the time may be right for expansion - or for the type of capital intensive strategic repositioning that some properties require.

In addition to adding rooms through renovation and new construction, many properties are rethinking their mix of space. Some are converting a portion of their rooms to condos - which requires significant investment, but can pay off handsomely when completed. Others are renovating public spaces to include more retail - which can provide a steady income stream over time. The other advantage to reconfiguring a property's retail space is that is gives management a chance to reconsider the type of retailers it includes. Should they be higher-end? Should a restaurant be designed in partnership with a celebrity chef? Can the retail space be used to add luster to the hotel? Or should it mainly be viewed as an amenity for guests? What formula will balance those needs - and produce the most income?

Of course, in some cases, the analysis process leads to unexpected conclusions. We were recently involved in a situation where it very quickly became clear that if the entire property were reconceived - for retail use rather than hotel - the property value would increase substantially.

But for most properties, the focus is simply addressing deferred needs. Over the past few years, with tough economic conditions, cash flow was suffering and non-essential maintenance was deferred. Now that the economy has improved and owners have access to the capital necessary to make improvements, they are finding that more than simple maintenance is required.

New construction in virtually every market and upgrades to existing properties have made it essential for any property that is looking toward the future to think about major investments in improvements, amenities and, in some cases, a major repositioning, simply to remain competitive.

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

Marco Albarran
Christian Koestler
Hillary Bressler
David Hogan
Ravneet Bhandari
Debbie Bermont
Steve McKee
Kurt A. Broadhag
Maurice Martin
Bill Kotrba
Coming up in April 2019...

Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.