Hospitality How-To: Oversee a PIP or renovation

By Jena Tesse Fox From Hotelmanagement.net

Improperly managed, a property improvement plan or renovation project can negatively affect a hotel’s business before the upgrades are completed. Here are six tips for avoiding stress—and extra costs—when undertaking an upgrade.

1. Understand the Market Conditions

Jake Zwaagstra, founder and CEO of real estate development firm TriCelta Development, emphasized the need to understand current market conditions before beginning a PIP or renovation. “The uncertainty from COVID gave owners a bit of a reprieve when it came to their [PIPs] and their updates,” he said. That “grace period,” however, is over, and hoteliers are hurrying to catch up, with thousands of rooms across the country in need of renovations. “And so you have a large breadth of owners that now are going to the market for these updates, which is creating a bit of a perfect storm when it comes to cost and [securing] resources that are similar in nature.” So many hotels requiring PIPs at once can drive competition among owners, he noted.

2. Understand the Scope

Different kinds of renovations put different types of pressure on owners and management companies, said Keith Shugerts, VP project and facilities management at Essex Hotel Management. While a hotel may undergo a PIP when it changes hands, many branded hotels will require regularly scheduled upgrades to meet new brand standards, upgrade soft goods or install new furniture, fixtures and equipment.

“If you're doing a seven-year renovation, there's a general guideline, but you still can negotiate within those guidelines,” Shugerts said. For example, while the guidelines may require upgrades to all areas of a hotel, some of those areas may still be in good shape and not require a renovation. Most brand representatives will understand that each project is unique and customize the requirements for what needs work, he said. “They'll work with you, depending on the condition of the property.”

3. Consider Design-Build Projects

Zwaagstra likes the design-build (sometimes called “alternative delivery”) system, in which the architect and the designer are contracted by a single entity (known as the design-builder) on a project, working together under one proverbial umbrella.

The process, Zwaagstra said, “provides flexibility” and limits risk “because your design and your budgets align through that process.” Design-build “puts a schedule at the forefront of every decision, and ultimately brings revenue in the door quicker.”

4. Get Someone to Manage the Process

Zwaagstra believes the first—and perhaps most important—step in organizing a PIP or renovation is to appoint an owner's representative to manage the process from the beginning. These experts may already have established relationships with contractors in local and regional markets—a benefit when labor is scarce. “They have the ability to pull from different labor pools to be able to address projects and look at economies,” he said.

Selecting the right contractors and providing them with the right resources is also crucial, Zwaagstra said. “Labor is scarce, and skilled labor is going to continue to be scarce, so looking and finding the right contractor that has the right availability to labor, I think, is key.”

5. Work Floor by Floor

When the Essex team handles a PIP or renovation, they work from the top down, Shugerts said. “We take a whole floor out, start[ing] at the top of the property, [and] work our way down to the first floor,” he said. Since the hotel remains open during the process, the construction crews stick to the active floor, he added, so guests rarely see them in other parts of the hotel and the construction does not interfere with their stay.

6. Start Saving Early

PIPs and renovations can be costly depending on what work needs doing. As such, Shugerts advises setting up a capital reserve “from day one” so when the due date arrives, the hotelier is ready for all expenses.