During economic recessions, it is no surprise that hoteliers are forced to reduce spending. Even though this process generally affects all areas and departments of a hotel, it is always unfortunate when CapEx is one of the sectors affected with deep cuts.
Once economic recoveries begin to emerge, most hoteliers will soon start thinking about dusting off their CapEx plans. However, waiting to update existing CapEx plans until after a recovery has started is not recommended. Instead, updating and re-aligning strategies previous to an economic recovery is crucial. Using this proactive approach, the planning is properly thought-out and completely assembled for action before it is needed. Therefore, hoteliers can be prepared to quickly implement CapEx when economic conditions warrant such. This will allow quick action to differentiate between their product and the competition. To even further maximize the results, avoid making the following costly mistakes.
- Not evaluating your competitive market – Research what guest features that your competition has used to capture business. Determine what innovative approach your hotel will need to exploit a competitive edge for a new surge of business. Some things you discover may be out of reach, but others creatively adapted to your hotel can take guest satisfaction to a new level.
- Failure to investigate the current condition of your facility – Not only should you re-evaluate such items as mechanical, plumbing, parking lot, etc.; it is important that public areas be appraised for conditions that may have occurred during recessionary times. This would involve commercial and guest FF & E, food & beverage outlets, kitchen and meeting space equipment. The object is to address items that will affect guest expectations.
- Multi-year CapEx plan not updated – Or, not existent. If your hotel does not have a multi-year CapEx plan, then there is value in building one. If a multi-year plan is in place, then enter the new found strategies into this long-range document. Of course, some CapEx items or projects will not be appropriate for immediate implementation, but should still be recorded into a future year.
It is important that you spend precious CapEx dollars effectively to address the “new normal” that surfaces after times of recession. Only by re-evaluating your present condition can a hotelier be assured that they are strategic in their future CapEx “spending”.
Question: What other issues have you identified? To post your comments click here.
Laurence Kenyon says
Speaking as a manufacturer I can say that there is unprecedented value in any remodel or new construction in today’s economy. Materials and labor costs have dropped have dropped to levels not seen for years. At some point soon this will change. Pent up demand and a worldwide industry loss of vendors and manufacturers will ultimately drive prices up. This is will happen soon. The best value is now. I agree “waiting to update existing CapEx plans until after a recovery has started is not recommended.
Thank you for your comments and observations! This pent up demand and loss of many “sub-vendors/suppliers” to the hospitality manufacturing interests…..will certainly make for interesting work for the purchasing companies “expeditors”!!!
Kim Alexander says
I also agree that the Hotels should be updating their existing CapEx on a regular basis. This avoids a lot of costly labor and Product that is really at its Prime Time right now. Working for Sysco/Guest Supply as a Purchasing Company, I have seen quite a bit of “No Budgeting” or “Scope” for Renovations that used to be done on a five + yearly plan. This makes it very difficult to negotiate better or best pricing anymore with the Suppliers/Vendors. So far, we have been able to keep some costs down having National Accounts set-up, but if we can’t Forecast a Budget, we all lose. I’m seeing more Hotels fail their QA because of no CapEx planning.
John, you have the best system in the Industry, that I wish everyone else would take heed too.
Good observation. It should be known that failing QA’s due to CapEx issues is a common occurance during the later parts of a recession. All is not lost! In these situations, a hotelier has to use the principle “When life gives you lemons, make lemonade”. Consider a 5 year capital expenditure plan part of “making lemonade”. Only then can a strategy be formulated off of the 5 year plan, to identify the most profit generating or cost eliminating expenditures to “tackle” first!