Renovations: Meeting Changing Market Demands

Address how changes in market culture lead to changes in ownership and increased upgrades/renovations

By Fred B. Roedel, III Partner & Managing Member, Roedel Companies, LLC | November 27, 2011

We have all been through a very trying economic period in the hotel industry during the past few years. Customers are continuing to expect more features & benefits from hotels, brands are challenged to design and implement brand standard changes that differentiate their product and provide the investor the opportunity to maximize revenues and market performance and Owners are constantly challenged with meeting their return on investment requirements and expectations while trying to keep up with the changing culture of customers and brands.

This constantly evolving environment will cause some owners to divest of assets versus investing in them and provide an opportunity for other owners to position their hotels to maximize their revenue, free cash flow and long-term investment return as markets improve.

Being the Best Hotel in a Market

The objective of any hotel owner/investor should be to develop and operate a hotel that performs at the top of its market. Every market is different in some way, but what is not different is that the paying customers ultimately determine what hotel will be a top RevPAR performer.

One key culture change in the hotel industry is that customers are expecting hotels to provide them with similar, if not better, features and benefits that they have in their own homes. Examples include faster high speed internet, HD television content, rooms with quality furnishings and finishes and an overall experience that lets them relax while they are not in their own homes. Today's customer are experienced, they know what they like and don't like, they can determine the overall condition of a hotel very quickly, they recognize if a hotel is well maintained and they make their purchasing decisions accordingly. If owners allow their assets to become poorly maintained and don't stay on top of their respective markets, to know if and when they should be investing in certain improvements, they will have little opportunity to capture the market that does exist and maintain their overall investment.

Three years ago our firm made the decision to renovate all of the guestrooms in one of our hotels. This particular property consistently received very high quality scores from the brand and we had no issues with our customer base, but the hotel had been open for 8 years and its decor had become dated against the latest standards of the brand. Most thought we were crazy to be investing the dollars we did during that challenging and worsening economic period. That investment allowed the hotel to maintain its customer base, pick up additional accounts that had been staying at "newer" hotels in the market and we have since been able to drive rate more aggressively with the improving market. We did not renovate the entire property; just the areas that, if not improved / renovated, would most negatively impact our ability to maximize occupancy and revenues. With the improving economy we have the plans in place to renovate the balance of the hotel in the next year.

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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.