renovation Archives - Fulton Hotel Solutions LLC

January 13, 2014 By John Fulton Leave a Comment

“Killer Tips” That Turn Your Hotel PIP Into A Winner

Product Improvement Plans can be a tremendous asset to the life blood of any hotel. Even though a PIP is designed to position a hotel for the future, it is also a very serious capital expenditure process. A little work on the front end of the PIP project can be most rewarding to hotel ownership, management and the renovation team. Consider the following tips….to help your team complete a PIP which will postitively affect the guest perception of the hotel.

1. Review & reconcile the PIP document

Product Improvement Plan documents can have mistaken or mis-leading information. Leaving these inaccurate pieces of data in the PIP can cost you substantial money. One of the requirements might read something like….“85 rooms have new wall coverings. These wall coverings are acceptable however the remaining rooms must be re-vinyled to match.” As an example….if the acceptable room quantity was actually 185 units, it could lead to an approximate $80,000 glitch in the cost analysis of the PIP. Even a few misleading issues added together could throw the PIP estimate off by several hundred thousand dollars. Bring all erroneous issues to the attention of the franchise’s PIP department. Get all the inconsistencies resolved, the wording changed and a revised PIP issued.

2. Determine the cost of the PIP

Some organizations use a combination of their Chief Engineers, outside Contractors and an Operations Director to “wing” the estimating phase of a Product Improvement Plan. This leaves too many “gray areas” and overlaps that can cause budget embarrassments at the end of the project. Good examples are such project costs as waste management, freight variances, sales or use taxes, contractor overhead & profit percentages, purchasing fees, equipment rental, storage, etc. Hoteliers can expect a better PIP project if they use an independent consultant to estimate the wide variety of elements involved in executing and completing a Product Improvement Plan. Such services are not expensive. Information and documents produced by such consultants are beneficial to ownership, financial partners, hotel management and the project team throughout the renovation process.

3. Assemble the right team

The mission is to accomplish the PIP renovation with the least disruption to the hotel guest and operations staff. The sub-components of this mission are bringing together a general contractor, architect/interior designer, purchasing group and consultants that all “buy-in” on bringing the project in “at/or under budget and on time”. Unexpected issues will surface in every Product Improvement Plan project, but each team member must commit to resolving those issues without direct effect to the overall budget or schedule.

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May 29, 2012 By John Fulton Leave a Comment

4 Deadly CapEx Budget Oversights – Are You Making Them?

When building Capital Expenditure Plans, costs that are often overlooked are those that are not tangible. Getting a firm quote from a vendor is relatively easy on a piece of kitchen equipment or even 300 rooms of guest room furnishings. However, it is important to realize that other costs associated with CapEx items or projects may not be so obvious.

“Late announced surprises” can contribute to severe cost overruns at the close out of the project. As it is said, “That could ruin your whole day”!!!!

1. Taxes

a. Sales Tax – These can vary but generally range from 4% to 8.25%. More states are on the upper end of this range than on the lower. Some cities or counties have additional taxes that are imposed due to Enterprise Zones, school improvements, civic improvements, etc.

b. Use Tax – Often it is assumed that purchases from out of state will not incur sales tax. However, it should be known that those states will seek “Use Tax” based on the purchase price of the product. These generally are about the same percentage as sales tax for the geographic location that the product is used or installed.

c. Contractors’ Excise Tax – Certain states require a collection of 2% of Gross Contractor Receipts plus the value of owner furnished materials handled or installed by that G.C. These taxes are imposed on the general contractor and paid by the general contractor; however, the cost will directly affect your CapEx budget through the general contractor’s cost to you. Check the area that you are performing CapEx to identify any such tax.

2. Freight – This category can have a wide swing in variance. Based on early 2012, CapEx budgets should allow 9% to 13% freight on the purchase price of the products, materials or equipment. Issues that would alter these estimates are fuel surcharges, charges for unusual weight or charges for cubic volume. Purchasing groups and logistic companies are very astute in managing freight costs for a hotelier and additionally can enhance the overall effectiveness of a project.

3. Professional Fees – This would include interior design, architectural, engineering, purchasing and other consultants that would be involved in the CapEx project.

4. Other – Installation charges, warehousing (including local delivery to the site), rental equipment, building permits and general contractor overhead and profit.

To assure that all capital expenditure plans are accurate, it is suggested that each project be thoroughly queried of the above questions.

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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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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?

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October 27, 2011 By John Fulton Leave a Comment

Breathe New Life Into Your Hotel – Let CapEx Do The Job

The statistics quoted in current trade journals are clear in identifying that patrons are finally looking for lodging and hospitality services again!

Having a fresh look and breathing new life into your hotel is now very critical in the process of seizing that new business! Maybe your hotel cannot accomplish a multi-million dollar CapEx renovation; however, based on this “new” business….astute hotel operators will see the need to meet the guests with noticeable improvements.

Some hoteliers will only be able to accomplish a few projects while others will have funds set aside to accomplish more. Those properties that operate under a franchise will no doubt be directed by the franchise system to carry out specific improvements based on brand standards. However, there will be additional issues that will affect the guests’ perception of your hotel. What will the guest see when they arrive? Is the access onto the property clean and groomed properly? Can the experience entering the hotel and approaching the registration desk be improved? And the guest rooms…..are they competitive and fresh in appearance?

This is where “Capital Expenditure Planning” comes into play by addressing issues proactively that affect the hotel guest. If you have formulated a 5 Year CapEx Plan most of the above issues should have already been identified, solutions formulated and cost estimates compiled. At this point, the issues are….when to activate the projects and gaining access to the capital funding. For those operators that do not have long-range CapEx plans in place, all is not lost. It will be necessary to do a walk-thru of at least the issues outlined above. Establish a list of those items most likely to negatively affect the guests’ perception of your facility. Discuss solutions then obtain estimates/quotes for suitable resolutions to these troublesome issues. At that point, set in place a plan to systematically resolve each issue based on the funds available and least disruption to business.

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September 19, 2011 By John Fulton Leave a Comment

Welcome Your Guests Back With Something Better!

When October occurs, the “ordering phase” for a hotel’s capital expenditure program can be considered complete. Waiting until this late date for items to be designed, specified, purchased, fabricated and shipped; pushes an end-of-the-year calendar date.

Not all is lost! Since most hotel business traditionally slumps from December to February, it still would be appropriate to use that time slot to perform and complete CapEx projects that prepare for the 2012 business.

So your strategy can be….welcome the guests back with something better!

With this being said, you should not initiate work on projects for December thru February until you have a developed a master plan! In that plan, use strategies that formulate a 2012 CapEx Plan aimed at improving guest satisfaction and promoting guest loyalty. To give a little help, the process is as follows:

Assessment Of Current CapEx Projects – Review your 2010 capital expenditures to identify any projects that should be expanded into 2012.
Evaluation Of Systems – Identify any new situations that surfaced in 2011 that will need to be addressed in 2012. Certainly it is natural to more focus on adding “glitz” to the facility, but failing mechanical systems, outdated technology, etc. adversely affect guest satisfaction and may need to take a serious position in the upcoming CapEx Plan.
Revenue Enhancement and Competitive Issues – You will not have a shortage of these projects. In fact, you will labor over eliminating projects that you know are viable, yet other needs seem to have a higher priority.
Pricing – Obtain preliminary bids and pricing.
Finalize Your Plan – This is the time to ask the hard questions, look at the costs, run ROI’s, balance the financial expectations and discuss timelines.

Within the above process, you should identify a few capital expenditures that can be kicked-off and completed before the 2012 business picks up. These should carry impact and be very recognizable to the guest!

With a well thought-out CapEx strategy…..you and your team can…….

Welcome Your Guests Back With Something Better!

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August 2, 2011 By John Fulton 2 Comments

Five key points in successful CapEx projects – are you using them?

Positive results regarding Capital Expenditure issues or their accompanying renovations……do not “just happen” successfully.

It goes to say, much work goes into converting Capital Expenditure Plans into actual working documents. Such tasks as gathering information from the hotel, imputing data into a CapEx format, identifying costs, wading through the approval process; are all required to roll out an “approved” Cap Ex Plan. If any of those Capital Expenditures call for a “project”, then there is much more work ahead. Although a brief article such as this cannot list every detail, it can identify some of the major issues that contribute to a successful CapEx project.

1. Leadership – Very early on, most hoteliers will identify a “project manager” to be the point-person and central authority to execute the CapEx work. As expected, a very large percentage of the project success will depend on this person’s ability to work with integrity as a team builder, motivator, and communicator; as well as dedicated to the success of the budget and schedule.

2. Partnership – An early-on collaboration between the project manager, management company and hotel’s senior staff will fine tune job site scheduling and proactively address various administrative Issues. Depending on the organizations’ structure, it is also advisable to keep the “hotel ownership” informed of the general progress.

3. Additional Specialists – Depending on the “scope of work”, other project team members that may be involved are architects, mechanical engineers, interior designers, renovation contractor, purchasing group, logistics company, specialty installers, etc. Strategic partnerships should be cultured between the project manager and each outside consultant.

4. Scope of Work Documents – These formal papers will need to be thorough, accurately defined and prepared in an easy to read format; since they are important directions to each member of the “project team” and cannot be taken lightly. Scope of work documents in collaboration with any project documents (see item #5 below) will define the specifics of what is to be removed, replaced, modified, refinished, etc.

5. Project Documents – Factors that also heavily contribute to successful CapEx projects are the development of accurately detailed drawings, thorough specifications and confirmed quantities.

Pass on your techniques for successful Capital Expenditure Projects (click here).

“Killer Tips” That Turn Your Hotel PIP Into A Winner

4 Deadly CapEx Budget Oversights – Are You Making Them?

Stolen CapEx Money – Are You Next?

CapEx Planning – If Not Now, When?

Breathe New Life Into Your Hotel – Let CapEx Do The Job

Welcome Your Guests Back With Something Better!

Five key points in successful CapEx projects – are you using them?

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