Ready to refresh: Best bets for ROI before the potential downturn


by Jerry Zeitner

When is the next economic downturn, and how impactful will it be? These are the questions on the minds of professionals across all industries, even as analysts share conflicting data and opinions via a variety of outlets.

Regardless of the outcome, the mere expectation of a potential economic slump is enough to push hoteliers to engage in a renovation. As the thought of a downturn tiptoes into our minds, there is increased pressure around acquiring renovation budget approvals.

Those looking to refresh their properties want to ensure that the funds are allocated prior to a potential recession, and the best time to make these decisions is now – when the industry is performing quite well. And, for owners and developers looking to invest in existing properties as well as forge new partnerships before the current growth cycle slows, there are a number of benefits and challenges to consider based on the type of property and renovation needed.

Renovation Type: Historic

Historic properties often hold a strong presence in local communities, which makes them prime options for renovation or redevelopment.

The recent renovation of the historic LeVeque Tower in Columbus, OH is one example. Much of the beauty in the building’s Art Deco detailing was hidden by office spaces and retail developments. The goal then became to reimagine the property and restore it to its former grandeur while keeping the expectations of today’s guest top of mind.

Projects like this one reap many rewards for hotel ownership, but must be handled carefully. Of course, when updating a treasured local building, the community wants to be informed and involved in the process. In the case of Hotel LeVeque, the renovation has been widely applauded, but the relationship between ownership and local community must be closely managed to ensure the public views the project favorably. If all goes as planned, the hotel will not only face less friction locally, but will be able to capitalize on trends of downtown revival to food and beverage options, and other amenities of interest to travelers and locals alike.

Executing historic renovations can be quite profitable, but the process is not without challenges. Historic tax credits are tremendously helpful, but can also put pressure on a tight budget when the wheels of government turn slowly.

Buildings with landmark restrictions can create obstacles as well. During a recent renovation of The Blackstone Hotel in Chicago, IL, it was required to work around landmarked paneling and light fixtures as they planned and executed fresh, activated public spaces within the property. These unchangeable details can be viewed as challenges that generate creative, innovative results from a design team, but are challenges nonetheless.

Renovation Type: Exterior Corridor Hotels

The dusty, forgotten “last resort” options for tired road warriors – exterior corridor hotels – are entering a renaissance. These properties are beginning to attract travelers from a number of demographics, from surfers searching for the next big wave to hip Millennials exploring the country’s trendiest neighborhoods.

Successful examples of this type of renovation include the Phoenix Hotel in San Francisco, CA and the Austin Motel in Austin, TX (both part of Bunkhouse Group). It’s no secret that these two cities are a draw for Gen Yers; they’ve been visiting in droves over the last few years.

These two properties take advantage of the desires and expectations of this demographic. This age group craves authenticity and uniqueness, and tends to spend a great deal of time scouring the web (and social media) for hotels that provide the right balance of comfort and edge. Both properties are decidedly funky, embracing a kitschy aesthetic that can be executed fairly inexpensively while still being Instagrammable and on-trend.

The major upside of this renovation type for ownership is clear – rather than spending millions of dollars knocking down the building and starting from scratch, the existing space can be renovated beyond recognition in a matter of months, not years, in a highly cost-effective manner.

Renovation Type: Select-Service

Select-service properties may make up 80 percent of new hotel construction projects in the United States, but that doesn’t mean renovations of these properties aren’t happening, too. With the proliferation of newly built hotels in this segment comes an imperative for existing properties to keep up with the fresh market entry down the road.

When Gettys ONE, a sister brand of The Gettys Group that specializes in interior design for select-service properties, took on the conversion of a former Four Points by Sheraton to become an AC Hotel by Marriott, a locally-inspired select-service property was born.

Working within the often-strict design guidelines set forth by each flag can be a challenge, but it is one that will cause the right hospitality design team to rise to the occasion. Even with tight parameters in place, there is an array of methods for renovating these properties to truly differentiate them from others, drawing an impressive ROI for ownership.

Striking a balance between adherence and ingenuity, the design of the AC Hotel Chicago Downtown offers innovative dining options and tech-enabled upgrades that attract budget-conscious young travelers who maintain high expectations for design and experience. From Kallpods throughout the public spaces to canned craft beers at the bar, these small details in select-service properties keep travelers returning again and again. Building loyalty through design is a priority in this segment, and the importance of consistent and frequent property updates will aid in maintaining a high return for hotel owners.

As analysts across all industries brace themselves for the next lull in the economy, hoteliers are fighting to receive renovation budget approvals ahead of time. Whether owners and developers want to update a historic building or upgrade an exterior corridor hotel, the time to plan for those types of renovations is now, while the industry is booming.


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