“We have grown, in part, to be a “throw-away society,” but we’re seeing the folly in that philosophy. Simple changes can be made that we’ve been seeing in hotel design, such as the complimentary amenities no longer being a one-time use item. The consideration, too, of the lifecycle of FF&E is on my mind. Using more quality made pieces that will last a full life cycle is not only good for the environment, but also good for the bottom line.” – Lesley Wong, Lesley Wong Interiors
According to ISHC latest CAPEX study, Capex spending for the U.S. hotel industry hit a new high in the past year, with the percentage of revenue spent on capital projects reaching 9%. In the study, it shared that on a per-available-room basis, Capex spending also hit a new record of $5,147, which increased 5.5% over the average from the same Capex study in 2018.
CAPEX (capital expenditures) refers to investments in the physical assets of the hotel that will benefit long-term. Ranging from upgrading HVAC systems to full-scale property renovations,
CAPEX is different from operational expenses (OPEX), which cover daily costs, as it focuses on maintaining and increasing your hotel’s value over time.
“By adapting to evolving consumer preferences, embracing innovation and integrating sustainability practices, hotel investors and operators can navigate the changing landscape and achieve long-term success. By creating self-contained ecosystems, hotel brands enhance the overall customer experience, cultivate loyalty, and drive shareholder value.”
– Zach Demuth, Global Head of Research at Hotels, JLL.
If your hotel is scheduling a renovation in 2025, the more detailed planning and communicating you do right now with your teams, suppliers, designers, general contractors and importantly your guests, the more cost-effective and successful your renovation will be.
- The Key is to Focus on improving your Existing Assets.
- Plan Early and Communicate with Your Team
“One of the biggest concerns is always making sure that a project finishes on time and on budget. It all starts with putting together preliminary budgets,” said Mark Friesen, Principal, Beyer Brown.
- Don’t Make a Price-Driven Decision and Don’t Throw Away the Specification!
- Add more Sustainability into your Project and Hotel.
Did you know that around 2% of the world’s carbon emissions come from hotels? “An owner’s asset management program should act as a crystal ball to your building’s future.” – Harold Stephens, President PBK Company, IIBEC BEAM Professionals.
When you make the decision to refresh your guestrooms in a renovation, it is important to understand the impact on a greater scale that replacing furniture makes for your hotel and the community around you. Replacing furniture impacts the budget greatly because of the supply chain disruption but also because of additional costs including:
Taxes, Shipping, Storage, Labor, Installation, Disposal fees and more.
But what if you can ELIMINATE THESE COSTS and take these substantial savings and reinvest those dollars back into your hotel for your guests? Well, you can, when you choose to fully refinish your existing FF&E with The Refinishing Touch.
“No excuses not to be sustainable: nature, communities, design, and if you still think the Sustainability market is not profitable, note that will reach USD $34.6 Billion by 2026.”
– Hector de Castro, Chairman REGENERA LUXURY and CEO De Castro Group
Photo Credit: The Refinishing Touch
It is also critical to have planned preventative maintenance built-in to your asset management. Hotel maintenance accounts for between 4% to 6% of the hotel’s operating budget.
Hotel properties built before 1990 require 11.6% of their revenue to be invested in upkeep, while hotels built between 1990-2000 require 9.1% of their revenue for Capex and hotels 16 to 20 years of age spend 9.2% of their revenue on upkeep, higher than 21 to 25 years old (9.1%).
Learn more about how to incorporate more sustainability in your hotel operations with
The Refinishing Touch “Go Green Ideas for Hotels and Resorts.”
- Reinvest savings back into your hotel from maintaining existing FF&E assets, and not replacing them, employee training, security, technology, HVAC, lighting and more!
Repairs and maintenance expenses as a percentage of total revenue were 4.4%, the study shares, which aligns with industry averages and the averages in Capex 2018 (4.1%) and Capex 2014 (4.6%) studies. However, repairs and maintenance expenses per available room ($2,461) declined compared to the prior survey ($2,595). The decline is attributed to fewer guests having fewer maintenance issues and the fact that hotels cut back on staffing and discretionary spending during the past few years. Additionally, the study stated:
“Not surprisingly, COVID significantly impacted capital spending. Because hotels were closed for parts of 2020-21 and overall revenue fell, this significantly inflated capital spending as a percentage of total revenue, with 2020 being an extreme outlier (18.2% in 2020 and 8.7% in 2021).
The Capex 2023 spending as a percentage of total revenue dropped from 9% to 7.9%, which falls between the numbers recorded for the same study in 2014 (8.3%) and 2018 (7.6%).
However, if you remove the 2020-21 data, the per-available-room metric for the latest Capex study spikes from $5,147 to $6,440. The report concluded that the 6% increase is similar to the rise in commercial construction costs during that timeframe.”
Other key areas contributing to expenditures include deferred maintenance, further reconfiguring of food and beverage outlets, compliance with brand standards, increased high-speed internet capacity, electronic door lock and access systems, and further enhancements to health systems and practices. As hotel brand options multiply, Property Improvement Projects, PIPs, continue to take center stage for hoteliers. Planning for PIPs early on can directly increase proceeds to sellers and lower the costs for buyers in most hotel transactions. In the right market conditions, a PIP can be highly beneficial. PIP renovations often create a path to increased profitability.
PIPs can vary for each hotel brand and for individual hotel properties. Older properties could require upgrades to mechanical and electrical systems, where newer properties may only need minor cosmetic changes. Some of the following areas of a hotel or resort may be addressed by a PIP:
- Plumbing, electrical, and mechanical systems
- Elevators and stairways
- Security, safety, and communications systems
- Guest rooms and corridors
- Hotel lobby
- Business centers/meeting spaces
- Fitness centers/swimming pools
- Food, restaurants, dining areas or facilities
- Landscaping
- Interior and exterior lighting
- ADA compliance
It does take time to get a PIP review in hand from virtually all the major brands. Usually, three to six weeks are required to prepare a PIP document that generally remains valid for six to 12 months so plan for a realistic timeline. Both the scope and completion time frame of a PIP are often negotiable. When it comes to the condition of the FF&E, it is the largest part of the hotel’s assets and must be addressed immediately. As they say, you don’t get a second chance to make a first impression with your guests and that includes the condition of your guest rooms. In most cases, updating guestrooms and public areas allows a hotel to be more competitive both for transient and group demand. If a PIP gives a hotel a chance to stand out among the competition, it can reward the owners with a greater market share and increased customer satisfaction, and thus a greater profit. Hotels are always looking to create those “Instagram-able spaces” within their hotel.
With the ongoing demand and increase of brand options contributing to rising PIP costs, parent brands seek to differentiate consumer experiences at each of their sub-brands, partially through furniture packages, revamped amenities and finishes. The total amount of work required to meet brand standards under a PIP can vary tremendously. These factors typically depend on:
- the property condition
- length of time since the property’s prior renovation
- and recently enacted brand standards not completed by the seller.
For over 47 years, The Refinishing Touch® has been at the forefront of providing the hospitality industry affordable and sustainable FF&E solutions and asset management. As a trusted PIP Advisor and Preferred Supplier for Hilton and many more brands, we have completed over 8,000 renovation projects nationwide. We help Project Managers, Designers, GM’s, Chief Engineers effectively navigate around the costly PIP pitfalls because of our years of experience and expertise.
Photo Credit: The Refinishing Touch
In the ISHC CAPEX study, it shared that “with record-level demand for CapEx expected to be stronger than ever after the pandemic, it is crucial to assemble the project team early and to plan way ahead on all projects.”
Whatever your costs are, we always encourage hoteliers to contact The Refinishing Touch® early in the specification process. It gives us the opportunity to save you even more money without incurring more costly missteps that could be avoided. And while our goal is to help you avoid pitfalls with our years of experience and expertise, we also know that if price is driving your decision, that can be the costliest misstep.
The most important issue to decide in the pre-project planning stage is an estimated “cost-per-key” overall project budget.
- Full-service hotels have the highest level of capital spending as a percentage of total revenue. Those numbers came in at 9.2% and $6,160 per available room, representing a 4.6% increase from the previous study.
- Select-service properties spending rose significantly in the 2023 study, with the percentage of revenue spent on capital projects hitting 7.3%, the highest in the survey’s history. That number was $2,334 per available room, a 51.7% increase from the 2018 study.
- Extended-stay spending Capex lowered significantly in the latest study (7.9%) compared to the previous study (12.5%), however it’s still the second-highest number on record.
The Refinishing Touch® provides sustainable and affordable on-site solutions with savings of at least 50% up to as much as 80%. In addition to extending the life of your FF&E for several more years, it provides the opportunity to take those years of savings and reinvest them into other areas of your hotel experiencing exponential change such as technology upgrades, security enhancements, HVAC improvements, lighting and so more.
Photo Credit: The Refinishing Touch
“Gone are the days when sustainability and environmental performance sit in different rooms/conversations to financial performance.
The new reality is: no longer is sustainability just about reducing environmental impact—it’s becoming a critical factor in financial decision making. The Energy & Environment Alliance (EEA) has launched a global initiative to develop sustainability standards for hotels, recognizing the growing link between eco-friendly practices and financial performance.”
-Amy Wald, Founder of Greenluxe and host of the Sustainable Hospitality Podcast
With the tremendous financial investments being committed toward reconnecting the brands with guests, it is more critical than ever for hotel owners, asset managers, hospitality management companies to really re-examine their portfolio and hotel assets. If your hotel needs updating and guest rooms need to be refreshed with a soft goods renovation, The Refinishing Touch® provides many viable and sustainable options!
Photo Credit: The Refinishing Touch
The Refinishing Touch will partner with you and review all the critical details during preconstruction planning of your renovation and provide many options you may not have considered. We provide on-site FF&E refinishing and restoration, and re-engineering but we additionally provide solid surface replacement including stone, glass and laminate. Our expertise includes providing strategic timing for when it’s best to have our team on the property during the renovation to keep it running seamlessly. We save you additional costs by not moving the furniture out of the rooms and incurring additional manpower, time and storage and reducing downtime of rooms out-of-service by getting the rooms back in-service the same day in many cases. This sets us apart and provides you with a trusted partner that has the professional experience you can count on.
Call Jeanne Shannon today at 1.800.523.9448 to discuss your upcoming guestroom renovation project. It would be a pleasure for our team at The Refinishing Touch to be your Sustainable, FF&E Solution Provider! For more information about our community of services, we invite you to learn more and visit www.therefinishingtouch.com
RESOURCES:
Study shows CapEx spending hits record highs
By Rob Schneider, Hotel Investment Today.
2025 Guide to CAPEX Budgeting for Hotel Owners: Why and How to Include Renovation and PIP Costs
Amerail Systems
Navigating the PIP Process with a Project Manager
By Stephen Siegel, Principal of H-CPM (Hospitality CPM)
Best Practices for Managing Your Hotel’s Next Property Improvements
by Lillian Connors
Preparing for a transaction in a new era of PIPs
By Nick Plasencia & Lou Plasencia
GLR Hospitality
What is a Property Improvement Plan (PIP) Really?