Post by Kerry Ranson, EVP and COO of Expotel Hospitality Services
With business finally on the rise, you’re probably feeling the pressure to start spending on your properties again. But is demand really strong enough to justify the investment? It depends on the investment.
It’s true that things are starting to turn around, but we’re hardly in a cash free-for-all situation—where we all have enough income to pay for existing debts and expenses, and cover major capital projects. Besides that, I personally don’t know of any lenders willing to finance a typical $15,000 to $20,000 per-room renovation right now.
One key reason we’re feeling pressure to invest again is the current national supply outlook for new properties. The total number of new properties under development is very low. Which means the situation for existing properties should be great in 2012 and 2013.
Granted, from a competitive standpoint that may be not entirely helpful right now. But at the same time, we have to start repositioning our properties now; whether we want to take advantage of future rate opportunities or have our properties in optimal condition to sell—when the time comes, we need to be prepared.
And no, now is not the time to sell. Even if you wanted to, the opportunities simply aren’t there—because the lenders aren’t willing to step up. Here’s a perfect example: We’re currently refinancing an existing property. We’ve secured a 30-year lease on the property’s parking lot. That’s twice as long as the 15-year note we’re negotiating to re-finance the property, and the bank’s telling us they’re concerned about our position on the parking lot. Where’s the sense in that?
That said, even if we could find anyone willing to finance room renovations, the rates are prohibitive. So we’ve focused our investment on the first things that make impressions on guests, on the services they desire. Dollar for dollar, I don’t think there’s better service to upgrade your Internet connection speed.
We already had cable service at one property. So the local cable company installed fiber optic for us at no charge. I’ve found you can usually get that kind of deal when a company doesn't have to make any changes from the street to your property. Another of our properties was an older building. We had to invest $6,500 to lay 670 feet of underground cable to the building but I’d still say it’s one of the best investments I’ve ever made.
And yes, I’m now paying extra each month on my cable / Internet bill. But now I can offer, and promote, connection speeds as high as 50-megs. More importantly, I’m now taking guests away from newer hotels down the street. Connection speed is that important. Travelers hate it when they can’t even get enough speed to download email—much less stream their movies and shows through Slingbox or Netflix.
Another investment that’s paying solid dividends in guest experience for us has been an upgrade to Hi Def TVs. If that’s on your own list, consider making the move sooner than later. The closer it gets to Christmas season, the tighter supplies get—and the lower your bargaining power.
Like most owners, we’ve coped with the downturn by becoming a leaner organization. We cut managerial and hourly positions, while still maintaining our strong focus on guest service. Speaking of which, it goes without saying that service is the critical place where we can always create better first impressions. That’s the way to hold market share for the time being. No, we haven’t enjoyed a complete recovery, but things are getting better. And for our people, that’s reason enough to keep smiling.