My experience is that too often hotels reluctantly undertake a refurb investment much later than they should have.
I’ve experienced ongoing customer feedback suggesting certain areas need upgrading and instinctively one is hesitant to spend unless it’s absolutely necessary.
I understand the hesitancy of hotel owners towards investing in upgrades when customer feedback suggests it is necessary.
However, customer feedback is a highly valuable indicator as to where and when a hotel should refurb. Further, I strongly recommend conducting a twice-yearly inspection of your product by the owner and manager where you sight a minimum of 10% of total rooms, as well as all public-facing and back-of-house areas, providing you with a comprehensive outlook of the status of your asset.
Ongoing refurbishment investment is important because:
- It helps to keep your asset up-to-date and attractive to your customers – aiding occupancy and room rate performance.
- It can help to increase the value of your asset.
- It can create new borrowing potential, through a positive revaluation result.
How do you fund a refurb?
Funding a refurb project can be accomplished in a few different ways.
- Conduct a feasibility analysis to determine the trading upside to occupancy and room rate that could be achieved from the refurbishment. This can increase borrowing potential.
- Investigate valuation increase potential off the back of strengthened trading projections and potential higher valuation outcome. This can increase borrowing potential.
- Lastly, scrapping the remaining value of depreciable assets can help offset the cost of the project.
Before you embark on a refurb, it is important to understand which upgrades will have the most positive impact.