Ultimate Guide to Hotel Renovation (Costs, Companies, Tips)
April 18, 2020
Hotel owners must maintain their properties in good to excellent condition in order to remain competitive. For many, that requires a continual process of maintenance, upgrades, and renovations. Some renovations have a modest cost impact, while others require substantial capital expenditures. Therefore, owners should be thoroughly familiar with:
- Hotel renovation costs
- Hotel renovation companies
- Hotel renovation contractors
- Scheduling hotel renovations
We’ll cover these topics and more in this article to help hotel owners sustain the value of their investments.
Video: Tie Lapse – Hotel Remodel in One Week
Hotel Renovation Costs
We can conveniently divide renovation costs among softgoods, redecoration, and construction. Softgoods include rugs, upholstery, mattresses, pillows, towels, drapes, and other similar items. Redecoration costs cover paint, wallpaper, surfaces, artwork, new furniture and fixtures, and other decor elements.
Occasionally, hotels need to undergo construction to rehabilitate, reconfigure, or expand the property. Projects might include a new exterior façade, new structures, new bathrooms, reworked interior spaces, expanded parking, and many more. Construction activities can also include technology upgrades to improve connectivity, security, control, and entertainment. Minor renovations may be relatively inexpensive whereas major construction can easily incur six-figure and seven-figure costs.
Hoteliers must be able to perform renovation activities while minimally disrupting hotel operations and revenues. This requires careful planning, budgeting, and financing. If you don’t have an integrated plan, you may end up wasting time and money.
The following HospitalityNet Table shows representative renovation costs for economy, extended stay, and midscale hotels. Naturally, renovation costs are larger for higher hotel classes.
How Long Do Hotel Renovations Take?
You might be able to replace softgoods in only a few weeks. More extensive renovations can take months, and a complete renovation might require the better part of a year or more. You should leave plenty of lead time to develop your detailed plans and pre-order materials/goods. Labor availability, or the lack thereof, can impact your renovation timeline. Naturally, you want renovations to proceed quickly so that you minimize downtime thus minimizing loss of revenues.
How to Schedule a Hotel Renovation
Not all renovations are the same. Many high-quality hotels maintain different renovations schedules, such as the following:
- Refurbishment: A refurbishment of softgoods, equipment, fixtures, and furniture can occur on a three-year to six-year cycle. For a five-star hotel, each refurbishment will probably cost between $8,000 and $12,000 per room.
- Basic Renovation: A basic renovation is more extensive than a refurbishment. It can mean upgrading features and systems, costing on average about $20,000 per room for a five-star hotel.
- Complete Renovation: This can take place every 25 to 50 years and includes major reconstruction. A five-star hotel may spend about $100,000 per room for a complete renovation.
Some other considerations for scheduling renovations can include:
- Seasonality: You’ll lose less revenue if you schedule your renovation during your off-season. However, you should make sure you contract for materials and labor well ahead of time. That’s because your competitors will also schedule their renovations during the off-season.
- Special Events: Perhaps a large annual or biennial event will occur in the next one to two years. You may want to schedule your renovations to be completed well before the event so that you can take your share of reservations.
- Competition: You might want to accelerate your renovation schedule if a new competitor opens a hotel near you. Otherwise, you may experience a vacancy rate increase. Alternatively, you may have to cut your room rates to compete with the new property.
- Low Vacancy Rates: If you sell out every night, you may want to expand your property to accommodate more guests. This may cause you to move up your basic or complete renovation cycle so that you can take advantage of the high demand.
- Environmental/Sustainability Factors: These include high utility costs, inefficient design, and other factors that you can correct with a basic renovation.
Useful Case Studies
Two useful renovation case studies are:
- Pacific Beach Hotel Renovation
- Nickelodeon Hotel Renovation
These renos illustrate that some renovations require expensive reconstruction to yield a brand-new guest experience.
Pacific Beach Hotel Renovation
The Pacific Beach Hotel renovation was completed in 2018 on Waikiki Beach in Hawaii. The original property was constructed in the late 1960s and reopened as the Alohilani Resort Waikiki Beach. The old hotel was claustrophobic and tacky. The price tag for the full-gut reno was $115 million. The new lobby features large wooden pillars, sculptures, white marble countertops, and chic couches and chairs. The lobby now hosts the Cozy O Bar that serves drinks and appetizers. Held over from the original hotel is a 280,000-gallon fish tank. The hotel enhanced the two-story Oceanarium Aquarium that will host more than 1,000 fish.
The reconfigured hotel boasts 839 rooms in two towers. New amenities include rooftop tennis courts, a spa, and a gym. A regular pool joins an infinity pool, both adjacent to the bar. Guests can rent a private cabana across from the pool deck. Naturally, the hotel opened a premier restaurant, Morimoto Asia Waikiki, with world-class cuisine. The hotel added a new breakfast restaurant as well. Room renovations are in the minimalist style with wood furnishings and off-white softgoods.
Nickelodeon Hotel Renovation
The Nickelodeon Hotel renovation in Orlando transformed the Nickelodeon Suites Resort into the Holiday Inn Resort Orlando. The cost for the renovation and rebranding was $27.5 million, creating the world’s largest Holiday Inn Resort. This was a major renovation that included a waterpark, bars, and food spaces. The property is an all-suite hotel aimed at attracting families visiting Orlando. The hotelier upgraded all the rooms and added dining venues to boot. Renovations extended to new restrooms, meeting rooms, lobby, lounge, and café. In addition, the hotel brought in new furniture, fixtures, and interior features.
The pool area has new surfacing, outdoor furniture, cabanas, even a yoga area. Kids will enjoy Club Candy, even if their dentists disapprove, as well as the Hershey Ice Cream Parlor. The 24-acre resort boasts 777 suites on six floors. The rooms include kitchenettes or full kitchens, shared living spaces, HD televisions and free WiFi. The waterpark has seven slides, four-story water tower, splash zone, water dump tank, and many other amenities. Other features include miniature gold, a basketball court, climbing nets, whirlpools, and water jets. Also, there’s a 4-D theater, a laser maze, and a 3,000-square-foot arcade.
Video: Pacific Beach Hotel to Undergo $115 Million Redevelopement
Helpful Advice and Tips
Remodeling/renovating should pay attention to more than just the hotel’s aesthetic. It also requires a careful assessment of the overall guest experience. This may uncover functional problems with your hotel’s operation and design that you need to address. Your initial study should evaluate all aspects of your hotel’s operations, including staffing and ease of service.
Once you understand your current situation, it’s time to specify your renovation concept. You can use a renovation to distinguish your property from competitors. This should include your requirements for new facilities and your opportunities to increase revenues. The project architect can help reconfigure the hotel to appeal to a particular submarket. For example, you might introduce a restaurant that specializes in local foods and wines.
Best Hotel Renovation Companies
Here are five of the top hotel renovation companies in the United States.
- LaMarca Construction: This is a top renovator focused on the hospitality industry. It has more than 20 years of experience that relies upon its innovative methodology. LaMarca specializes in plans that minimize room displacement that have detailed bid breakdowns and cost analysis. Recent Project: Residence Inn in Louisville, KY.
- CSP Inc: This is the renovation division of Complete Structure Painting Inc. (founded in 1979) and is one of the country’s largest hotel renovation firms. It helps hotels comply with Property Improvement Plans (PIP) and upgraded FF&E (furniture, fixtures, and equipment). Recent Project: Hilton Hotel in Rockville, MD.
- Case & Associates: This company has specialized in hotel construction and renovation for 32 years. It focuses on delivering owner satisfaction through quality results. Case works with both boutique hotels and major chains nationwide. Recent Project: Stella Hotel in Bryan, TX.
- IDC Construction: Founded in 1999, IDC operates exclusively within the hospitality industry. It has developed and renovated properties in projects worth more than $900 million. Partners include Hilton, Marriott, Hyatt, and InterContinental Hotels (IHC). Recent Project: Marriott Hotel in Winston Salem, NC.
- Level 3 Construction: This company employs emerging technologies to deliver top-quality projects. It handles projects of all sizes, from small tenant improvements to multi-million dollar construction and renovation. The company started in 2006. Recent Project: Wyndham Hotel, Garden Grove CA.
How Assets America® Can Help
Assets America® can help you finance your hotel renovation project without all the hassles you suffer from banks. Our network of private lenders and local/regional banks can fund most projects from $10 million up. Don’t waste months negotiating with banks – contact us today for a private consultation.
Frequently Asked Questions
Why does hotel cap rate decrease after renovation?
The cap rate is net operating income divided by current market value. A hotel renovation immediately increases the value of the property, even as NOI also increases due to rate increases. The result is a lower cap rate.
How much has hotel renovation gone up since 2013?
The annual average hotel capital expenditures for renovations increased by 7% since 2013. The year 2020 will see a severe downturn in renovation activity due to the Covid-19 pandemic. Depending upon the recovery, renovations may also be depressed through 2021.
How can you make an average hotel stand out without an expensive remodel?
You can upgrade the softgoods and signage at a modest price. This includes new carpets, drapes, curtains, and upholstered items. Rooms can get new towels, bedspreads, sheets, pillows, and artwork.