Legal Outlook: Renovation Time!

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

Is it time to add onto the property, constructing new guest rooms, or a conference center, or recreational facilities, or a spa?

Are there relatively minor expenditures, short of new construction, that can add significant value?

As with other aspects of hotel development and management, knowledge of the marketplace, knowledge of your clientele and insight into your own positioning are crucial. For example, upscale isn't always the way to go. What if there is a new convention center? In a large city, with an abundance of luxury hotels within a short distance, perhaps a three-star hotel, offering convenience, accessibility and relatively low cost for business travelers and convention-goers, would be far better. You need to identify your customer and the demands of your location.

The big chains are all moving forward with efforts to make their clients more comfortable, whether through the installation of new beds, better sheets and towels, improved restaurants - many offering menus that accommodate the various diet trends we're seeing - and other aesthetic touches that make the traveler feel at home. Smaller, independent properties are going to have to follow suit if they want to compete and continue to attract loyal clients.

There's another trends hotels can take advantage of at relatively low cost as well. Technology is causing business to be mixed with pleasure more and more often. People traveling to a location mainly for business might extend their stay and invite their families to join them, if they knew there were facilities their families - and they -- could enjoy when not working. And leisure travelers find it easier to get away - more frequently and for longer periods - if they know they can easily stay connected to their office and business affairs.

Properties that are not traditional business hotels are now giving clients the ability to use high-speed wireless Internet connections in their rooms and throughout the hotel. Many are supplementing their business centers with banks of computers, installed at visible, central locations, so that clients passing by on their way to the pool or the restaurant can stop for a minute and check their e-mail.

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Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.