Renovations require a lot of capital expenditure (upfront money investment), but they can increase your Revenue Per Available Room (RevPAR) both immediately and in the long run.
One of our very own By Magnuson Worldwide properties rebranded and renovated from being the a 2* Towpath Motel to a 3* Hotel on Monroe. As a result, they have increased their Average Daily Rate (ADR) from $60 to $99…which is a 65% increase in less than 12 months!!!
Given the fact that millennials prefer stylish, boutique hotel experiences link:
As this is not an easy endeavor, here are some important questions you should ask before embarking on a renovation journey.
Are you upgrading or just redesigning?
If you are upgrading, you need to consider how you market to a different target segment and if this is commercially viable. If you’re just redesigning, you should consider how much you can realistically increase your Gross Room Revenue (GRR) vs your initial investment…or if this is more a maintenance exercise to last the next 5-10 years.
When and how long will the project take?
It’s probably best to renovate during the off season so you minimize your loss of business. If you do a full scale survey of what needs updating or fixing, you can probably segregate these into essentials and items that you can add later on. It would probably be best to factor in a buffer period for delays. You don’t want to just have renovated in time for peak summer season only to have delays that eat into your peak season profits.
What design changes are you making and why?
As renovations are a costly endeavor, it would be best if you opt for a design that’s durable. If you have neutral and solid colors, it’s less likely to go out of date. You can accentuate and remain stylish with your choice of soft furnishings.
Make a commercial projection
There’s no point renovating only to find out that you’ve renovated for the wrong target segment or overspent on the property. This requires a little research on everything from the local market demands, renovation costs and business loans. You want to then look at these potential outlays vs the revenue growth to have a realistic projection of your Gross Operating Profit Per Available Room (link)
Here are Magnuson, we advise our hotels on their positioning to get them an optimal RevPAR.
Some hotels, whether it Economy or Midscale might better off investing in an upgrade so they can achieve a higher market segment and price point, just like Hotel on Monroe.