Steve Robinson

Hotels Start Remodeling Again

Spending by American hotels on improvements is forecasted to rise by 30 percent this year to $3.5 billion.  This is the first increase since 2008 and is being motivated by a recovery in guest demand and a push from national chains.

Prior to 2009 hotels were spending aggressively installing amenities that have become standard at even midprice chains:  thicker beds, Wi-Fi Internet access, flat screen TVs and redesigned lobbies.

U.S. hotels spent an industry record $5.5 billion on improvements in 2008.  Capital investment dropped dramatically when the recession motivated many to stay at home.  Capital spending on improvements dropped 40 percent in 2009 and another 18 percent in 2010.

Many hotels are in need of investment with their carpeting, wall covering and upholstery looking worn. 

Investment is increasing in part from new owners who purchased foreclosed hotels in need of renovations.  One example is Richfield Hospitality which purchased a 565 room Sheraton in Bloomington, Indiana earlier this year.  It is in the process of spending $30,000 per room on upgrades.

Many national hotel chains were tolerant of local owners holding off on renovations during the recession but are now demanding upgrades.

Even with the rise in spending, many hotels will remain cautious given that profit margins are at an 18 years low on a per room basis and occupancy is projected to remain at or below 60 percent nationally.

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