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You are here: Home / Archives for Extending The Life Of The Asset

November 16, 2012 By John Fulton Leave a Comment

3 Common PIP Mistakes – Which Do You Want To Overcome?

Don’t let hotel PIP’s waste your valuable dollars

Product Improvement Plans issued by hotel franchise systems are prompted by a property reaching the term of its license agreement, a change of ownership or the anticipation of a change of ownership.  Ordering a PIP evaluation suggests that there may be a business strategy at play that involves repositioning a hotel into a different service segment, aligning with a different franchise or refreshing it’s appearance….or all three.  Whatever the reasoning, there are three mistakes that ownership should avoid:

1.       Not getting prepared for the PIP.

When PIP Auditors see worn or dirty conditions, it causes them to look deeper for deferred maintenance and other infractions that maybe PIP related.  By failing to let the hotel show at its best…owners do themselves a great injustice.  To make this mistake means more issues will show up on the official PIP document.  To be properly prepared, a heavy emphasis should be placed on issues such as a fresh coat of paint on fire lanes, doors/frames and scuffed walls.  Overgrown landscaping trimmed or removed, winter kill shrubbery should be replaced, carpets/furniture/light fixtures cleaned and repaired while storage rooms should be cleaned out and re-organized and guest rooms in top condition.  The last point in getting prepared for the evaluation is just as valuable as the above items……be present for the PIP “walk-thru”.  Not only will you will gain valuable insight from the PIP Auditor, you will be more effective when it comes time for a later face-to-face meeting with the “brand”.

2.       Not taking time to eliminate all errors in the PIP document.

Scour the document for comments that are not representational of your hotel.  On a recent PIP, I discovered a requirement of replacing the mismatched guest room bath floor tile.  Upon further investigation there was not an incidence of mismatched floor tile….anywhere.  “PIP Auditors” often see several properties a week; often two in a single day.  The reality is that they or the support staff may inadvertently cross-over notations from another property.   If the above mentioned PIP were priced out without questioning that issue, it would have amounted to $500 to $750 per room; falsely impacting the PIP project by approximately $120,000.  Especially “scrub-down” the guest room obligations, since any one faulty requirement in this area can heavily impact the PIP cost.

3.       Failing to evaluate each PIP requirement against guest satisfaction, price/value and revenue generation.

All PIP documents contain requirements that will have varying levels of influence on guest perception and hotel revenue…..and each has a price tag.  There may be requirements that relate to signature issues specific to the “brand”.  Because of their importance to the franchise, these almost always are not worth the time to negotiate.   However, other issues maybe based on general feelings of what that franchise believes will “take care of the guest” in their special way.  In addition, other issues may be addressed due to “condition” (or degree of worn-ness).  Now is the time to apply “creative problem solving skills” to look at every angle of the last two categories.  Can items on the PIP be reconditioned successfully at a lower cost to gain several more years of use versus replacing now with an expensive new product?  Can certain PIP requirements be re-scheduled into year 2 or 3, to allow revenue producing projects to be accomplished early in the PIP renovation?

General comments

  • This is important….approach the “brand” involvement as a valuable associate that brings specific strengths to your future success.  Therefore, after you complete above items 1 – 3, schedule a face-to-face meeting with the franchise representative.  Based on your hotel’s guests…..discuss the effect of PIP items that add strength to the hotel and those that are counter-productive….due to their nature or un-recoverable cost.  Work to produce common ground for a win-win business venture before you implement the PIP renovation.  I once had a hotel General Manager tell me that his company could not make him run a bad hotel.  In this statement I took it to mean that he had to do what it took to make the hotel experience appropriate for his guest.  Don’t’ let a PIP miss the mark of satisfying the guest.
  • There will be items that are not covered on a PIP.  Therefore, take the opportunity to “touch” other needy areas, support systems and equipment not mentioned in the PIP.  Evaluate these items based on bolstering guest satisfaction or enhancing revenue versus the dollar spent.

I’ve shown you 3 reasons to get on top of your PIP process.  But, I have intentionally left out many others because I would like to hear your thoughts on the matter as well.  Leave your remarks in the comment box below. 

If you need help pricing out your PIP, watch this short video.

Filed Under: Budgets & Reserves, Lifecycles, Organizational, Successful Projects Tagged With: capex, CapEx scheduling, capital expenditures, Extending The Life Of The Asset, hotel ownership, interior designers, John Fulton, management company, PIP, Product Improvement Plans, project documents, R & M

February 16, 2012 By John Fulton 2 Comments

Stolen CapEx Money – Are You Next?

Assume that $200,000 to $300,000 of your hotel’s much needed capital expenditure program had been “stolen” and will not be recovered.  You will not be able to benefit from those CapEx projects, nonetheless; your hotel is still expected to exceed the guest expectations and surpass aggressive competition.  On the surface this scenario seems ridiculous, however; this is exactly what is happening to many hotels.  Too often CapEx projects waiting for their turn in the chronological order of replacements and renovations are delayed or cancelled.  Which of the following procedures are responsible for stealing funds from your future CapEx projects!

1)      Prematurely Replacing Guest Room Faucets

Your hotel waited far too long to get a guest bathroom renovation!  However; it is now complete, you are well ahead of your competitive set and your company expects to gain some impressive revenues over the next 6 years.  Not so quick!  18 months into this cycle you begin to see Q.A. comments regarding conditions of these faucets.  As you investigate, you determine that the chrome or plated finish is coming off and allowing the brass to show through on fixtures that should last 10 years!!! 

Cause

  • Many hotel operators have found too late that abrasive cleaning pads or abrasive cleaning solutions “have found their home” onto maid carts.  Repetitive use of these products will slowly but surely scrape the finish off to expose the brass. 
  • This unnecessary replacement is unfortunate since faucets will generally clean up beautifully with no more than warm water and a little mild soap.  Hoteliers should immediately remove these abrasive cleaners from the faucet cleaning process and re-train their associates!

 Projects Stolen from your Capital Expenditure Program

  • On a 400 room hotel, having to pre-maturely replace the bathroom fixtures could steal $58,000 to $65,000  from that much needed meeting room sound system, roof project or new energy management system.

 2)      Prematurely Replacing Guest Room Bath Mirrors

In a recent walk-thru you found strange looking black spots about the size of dimes and quarters on many guest room bath mirrors.  They are unsightly and substantially lower the guests’ perception of the entire bathroom.  Because of the blemishes, franchised properties will face reduced Q.A. scores and independent hotels will face guest satisfaction issues.  This situation is a disgrace since bath room mirrors should last 7 to 10 years.

Cause 

  • Black spots are caused by the silver plating separating from the glass and allowing oxidation to occur.  The silver plating of a mirror is protected on the back side by a special coating.  As hotel associates spray the mirrors for cleaning the liquid often runs down the mirror and collects at the bottom and sides.  This liquid then wicks into the back of the mirror.
  • If ammonia is one of the ingredients of the cleaning solution, its contact with the protective coating causes the silver plating to oxidize and create black spots.
  • The damage will not be obvious for several months or a year after the new mirrors are installed.  By this time it is too late to reverse the damage and replacement is almost always necessary. 

 ROI Stolen from your Capital Expenditure Program

  • This 400 room hotel could face $64,000 to $78,000 to replace these mirrors!  What revenue producing capital expenditure project could you have put in place if this wasteful replacement had not occurred?

 3)      Premature Corridor Wall Covering Replacement

You begin to notice horizontal lines on your nearly new corridor wall covering.  These lines are not rips or gouges in the vinyl but instead unsightly “lines” that are becoming an eyesore. 

Cause

  • This is a direct result of laundry carts being allowed on the guest floors.  Even though cushions, bumpers or suede leather wraps are installed on all four corners of the carts, damage can occur. 
  • The protective bumpers (suede leather wraps included) are rubbing the wall covering.  Because of this, they are “burnishing” a line on the wall which changes the light reflective nature of that area of wall covering. 
  • Associates often tie a towel or rope on the laundry cart to pull it as they collect the soiled linen.  Laundry carts will veer from one side of the corridor to the other…often rubbing against the wall for some distance.  Since the cart is not “gouging” the wall, the associate thinks nothing of it.
  • The costly results of this will not show up at first, but when it does…..it is too late.  Short of installing a horizontal piece of woodwork over the damage, you will need to re-do your corridor wall covering project. 

 Money stolen from your CapEx program

  • Unfortunately, this mistake will be responsible for deferring or cancelling $93,000 to $135,000 of your future capital expenditure projects.   

As you can see….it only takes a few issues to collectively steal $200,000 to $300,000 from your hotel’s CapEx program!

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Need a little help understanding how John Fulton can formulate solutions to “Extending The Life Of Your Asset” and better organizing your hotel’s “5 Year CapEx Plan”?

Contact John Fulton for details.

 

Filed Under: Annual & Multi-Year Plans, Budgets & Reserves, Lifecycles Tagged With: capex, CapEx planning, capital expenditures, emergency capital expenditures, emergency capital planning, Extending The Life Of The Asset, hospitality, John Fulton, lifecycle, R & M, renovation, Repair & Maintenance, work orders

January 30, 2012 By John Fulton Leave a Comment

CapEx Planning – If Not Now, When?

 

It has been noted in many recent trade journals that 2012 & 2013 will see elevated activity in renovations, compliance to brand standards and the repositioning of hotels!

This expectation comes with a solid foundation!

• All indications point to another year of very little debt or equity financing available for new construction.  This is a huge advantage for existing hotels that revitalize their properties for the coming business demand.  As business improves, no-action regarding deferred CapEx is “poor business”.  It is important that hoteliers take action to both “Extend The Life Of The Asset” and position the hotel to outperform the competitive set.

• Even those properties seeking to secure “contract” business will need to invest in their asset! Prospective clients and meeting planners often demand a commitment that specific items be addressed before an agreement is finalized. Requests such as these may involve meeting room technology, guest room upgrades or fitness center improvements. Identifying and completing those improvements before your client visits your property is strategic! For hotels…..you never get a better time to make a “good first impression”……than the first impression!!

Therefore, properties that refuse to strategically plan and activate upgrades and improvements will miss the full impact of a recovering business environment.  In reverse, those hoteliers that have prudently performed……or are now “kicking-off”  CapEx projects will be the first in line to capture the new business.

So the real question is:  Your CapEx Planning – If Not Now, When?

Take a moment to share your insight……click here.

Need a little help understanding how John Fulton can formulate solutions to “Extending The Life Of Your Asset” and better organizing your hotel’s “5 Year CapEx Plan”?

Contact John Fulton for details.

Filed Under: Annual & Multi-Year Plans, Budgets & Reserves, Organizational Tagged With: capex, CapEx planning, capital expenditures, economic recovery, Extending The Life Of The Asset, hospitality, John Fulton, management company, renovation

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Recent Posts

  • “Killer Tips” That Turn Your Hotel PIP Into A Winner
  • 3 Hotel PIP Secrets Exposed
  • 3 Common PIP Mistakes – Which Do You Want To Overcome?
  • 4 Deadly CapEx Budget Oversights – Are You Making Them?
  • Stolen CapEx Money – Are You Next?
  • CapEx Planning – If Not Now, When?
  • The Power Of A “Black Box” – Are You Using It?

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About Fulton Hotel Solutions

As the hotel industry now demonstrates a “comeback”, years of diluted and deferred capital expenditures do not have to … Read More...

Recent Posts

  • “Killer Tips” That Turn Your Hotel PIP Into A Winner
  • 3 Hotel PIP Secrets Exposed
  • 3 Common PIP Mistakes – Which Do You Want To Overcome?
  • 4 Deadly CapEx Budget Oversights – Are You Making Them?
  • Stolen CapEx Money – Are You Next?

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John Fulton
CapEx Strategist
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205 E. South St., Box 266
Mt. Vernon, MO 65712

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