Renovation ROIJanuary 1, 2015

New & Renovated Hotels Can Offer More for Less, Even in a Seller's Market By
January 1, 2015

Renovation ROI

New & Renovated Hotels Can Offer More for Less, Even in a Seller's Market
The Mayflower’s General Manager John Montano was given the honor of breaking down the first room, officially marking the launch of the Washington, DC, hotel’s $20 million room renovation.

The Mayflower’s General Manager John Montano was given the honor of breaking down the first room, officially marking the launch of the Washington, DC, hotel’s $20 million room renovation.

Recent studies on meeting budgets and hotel room rates together imply that cost control may become a little more challenging for meeting planners this year. One strategy to offset rising rates is to book new or newly renovated hotels, which often will offer lots of bang for fewer bucks.

The North American planners who participated in a survey conducted for American Express Meetings & Events’ 2015 Global Meetings & Events Fore­cast indicated flat budgets, with fewer than 7 percent of respondents predicting changes of 10 percent or more to their program spend or meeting budgets. Compounded with flat budgets is an expected increase in lodging costs, according to PwC’s Hospitality Directions US (November). Higher demand during the first nine months of 2014, particularly from group clients, has driven up room rates to the point where hoteliers will see an 8.2 percent increase in RevPAR in 2014, and a 7.4 percent RevPAR increase in 2015, PwC US predicted.


There are many scenarios that can ease the challenge posed by rising room rates. The planner may happen to be at a company where the meetings budget is not remaining flat, but increasing. He or she may have strong relationships with certain hoteliers and be able to negotiate more concessions. And in some cases, a planner may be able to book a newly opened hotel or resort, which often comes along with a deal on room rates.

“They’re trying to get the hotel well known and trying to get large groups there, so more people can see it,” notes Brett Pugh, Institutional Placements, with Syracuse, New York-based Bankers Healthcare Group Inc., which met at the Four Seasons Resort Orlando at Walt Disney World Resort shortly after its debut this summer. “I think we got a very good deal and don’t know if we’ll ever get that again.”

Gary M. Pearson, director, corporate meetings and events, with Chicago, Illinois-based Aon Service Corporation, generalizes the point: “You’re able to get some really good rates (at new properties), although within two years you won’t be able to touch that rate again.” Unfortunately, the opportunities to get those good rates have been relatively infrequent in recent years, Pearson observes. “In the U.S. I haven’t seen that many new hotels come online until the last year or so, because it took a few years (after recession) before money opened up and they were able to build. The demand is still greater than the supply, but the supply is slowly creeping up, so when these new hotels come online, people are just jumping on them.”

Supply Pipeline Expanding

Pearson’s analysis dovetails with the PwC report, which notes that “the supply pipeline continues to expand, with hotels under construction increasing approximately 40 percent in the third quarter, compared to the same period last year. As a result, our outlook anticipates supply growth to accelerate to 1.4 percent in 2015.”

In particular, Pearson looks forward to the March opening of the Loews Chicago Hotel, offering 400 guest rooms and 29,000 sf of indoor and outdoor function space. The brand’s new properties, Pearson feels, exemplify another benefit of meeting at new hotels, apart from the reduced rates that are common. The hoteliers often will incorporate the latest and greatest in hospitality technology and facility design, representing “things they’ve learned from other hotel builds. They have the ability to (add those features) from scratch, whereas existing hotels may not be able to do that.”

“The demand is still greater than the supply, but the supply is slowly creeping up, so when these new hotels come online, people are just jumping on them.” — Gary Pearson

Such features can be pleasant surprises for attendees. At the Four Seasons Resort Orlando, Bankers Healthcare Group hosted about 145 community bankers and about 40 employees for an educational seminar for current and potential customers. In spring 2014, the firm held a similar event at the Four Seasons Hotel Las Vegas. “One of Four Seasons Resort Orlando’s tech amenities, which the Las Vegas property didn’t have, was a TV in the guest room bathrooms through the mirror. Many people didn’t expect that, and nearly every attendee I talked to brought it up,” Pugh says. “They also had these tablets at your bedside where you could control the heating and lighting, schedule wakeup calls, order room service, and so on, instead of calling a department or the operator.”

Overall “it was definitely one of our selling points that it was a brand new property,” Pugh says. “I think people like something new that they are among the first to experience.” According to Pugh, attendees “loved the design, décor and the whole layout” of the 443-room hotel, which houses 37,750 sf of function space. The proximity to Walt Disney World Resort’s attractions was a plus: “We had a few attendees bring their families, arrive a couple of days early, and stay a couple of days late. So it made it more desirable to our customers having it so close to Disney and part of their property.”

Staffing Issues

The various benefits of booking a new hotel come with a cautionary note that many planners are familiar with: A new operation is oftentimes not as cohesive as a staff that has been working together for years. Pearson, a longtime insurance industry meeting planner, has seen better performance by new hotel staffs than in the past. “The hotels now know that because of the competitive nature of the industry, they can’t open up and have disasters or problems, and they’re oftentimes bringing in teams from other hotels within their chain to help get the operation going,” he observes. “A bad review can knock you down for a while; it may take a while to regain the trust of the planners and companies. So you can’t risk starting off poorly.”

While the presence of seasoned staff from the same chain will likely prevent serious problems, it may be that service is still less than optimal while the staff improves its coordination. It is thus sensible to “play it safe” by giving the new operation a little time to become entrenched before bringing in a group. “I don’t have any problems going to new properties, I just don’t want to be the first customer,” Pearson says.

It’s a takeaway from a bad service experience he had with a property that opened in the Chicago suburbs in the 1980s. “We were the first customer, and the opening kept getting pushed back. It was not a good experience, and they just weren’t ready. I learned from that, and if a property announces an opening date, I usually try not to (hold a meeting) until three to four months afterwards, at the minimum.”

Bankers Healthcare Group met at the Four Seasons Resort Orlando after several other group clients, arriving about a month after the resort’s debut, and Pugh says that hosting groups beforehand “definitely helped” the property to prepare logistically to host his group.

Brand Confidence

Brand confidence also can come into play when booking with new hotels. Bankers Healthcare Group’s positive experience with the Four Seasons brand in Las Vegas motivated the site choice for the Orlando seminar, which was the company’s first time using a new property and first time meeting in Orlando. That scenario can create quite a bit of stress for a meeting planner. “No event ever happens without a hiccup, but having already completed an event with Four Seasons, I felt pretty confident that if something came up they would make it right, and we really didn’t have any major issues,” Pugh relates. “They were very well organized. Our attendees liked the general feel from the employees, how everybody was treated, and the staff seemed to definitely enjoy their jobs.” Pugh adds that his sales representative took it upon herself to send him pictures of the meeting setups from a prior event, which made him feel more comfortable about his upcoming meeting at the new resort.

Site Visits

If a picture is worth a thousand words, a site visit is worth even more. Mary Dier, executive assistant to J. Powell Brown, president and CEO of Brown & Brown Insurance, was one of the invitees to the open house for The Shores Resort & Spa’s recently completed property-wide transformation. The four-diamond, Daytona Beach Shores, Florida, resort now features enhancements to all 212 guest rooms and its 20,000 sf of indoor and outdoor function space, including the 6,895-sf Grand Ballroom.

The locally based insurance firm is a longtime client of The Shores, and Dier states that board members are “really looking forward” to the shareholders meeting on January 20. “I brought two of my colleagues (to the open house), and they were impressed with the changes,” she says. The group utilizes essentially all of the top-floor meeting rooms, which have been redesigned with a beach-themed color palette. “I thought the colors they chose made it richer looking and updated it quite a bit,” Dier says. “One of the other things that they did that I thought was very important was the cabanas. They have rooms that face the pool and basically put up full-size walls so you have more of a cabana feel and privacy, while still being able to see the ocean and the pool area.”

The resort’s 14 lanai rooms are now Cabana Suites that include flat-screen TVs, ceiling fans, private lounge chairs and comfortable seating areas. Other improvements include: a new private dining room, increased 100 mpbs wireless bandwidth throughout the property, a new 80-inch flat screen monitor with a built-in AV package in the Surf Boardroom, an additional check-in area, new furniture in the Indulge Spa and more.

Renovation Timeline

The work involved in finalizing a new property or a property-wide renovated hotel  can be so extensive that there may well be delays. If the meeting dates cannot be set months after the completion date, as Pearson advises, it’s best to stay clearly informed on the status of the work and whether any of it will extend into the meeting dates.

“For the most part, renovations, especially at the larger hotels, are seldom finished on time, so it can be a little nerve-wracking,” says Pugh, and the same point applies to the work on new properties. “We were about six weeks out from their finish date for the Four Seasons, but I know that they were constantly still working on things when we were there. So I think it’s definitely difficult for hotels to finish everything (on time).”

However, Pugh had discussed the nature of the ongoing work with the Four Seasons beforehand. “It was going to be more landscaping work, so I wasn’t as worried about that because I had already seen a lot of pictures of the property; they were just (doing touchups). If they were doing landscaping with big machinery we might have had some noise issues, but we knew that part of the construction was going to be done by the end of August.”

Communication Is Key

Pearson recalls a RIMS (Risk Man­agement Society) conference booked at a hotel that did not advise the group about its ongoing renovations. Ultimately the meeting was not adversely affected, but a very stressful situation was created. “We started the conference on Sunday, and on Saturday night they were still wallpapering and putting down carpet,” he relates. “Some execs got there early, and one of the levels that we were going to be using was still torn up, and people got on the phone saying, ‘What’s going on here?’ We were on the phone with the GM and my national contact from the chain. It all ended up fine, but I went through the ringer on that one.”

The group’s reaction was the main cause of stress, he explains. “As a planner, once I found out what they were doing, I trusted they were going to be finished. But a non-meetings person (can overreact and think) it’s not going to work, we’re going to sue them, etc. It’s tough to tell some big execs who think the event is going to be a failure that you know it’s going to be done.”

Such a predicament can be avoided with better communication upfront about the status of the renovated hotel project, and, if possible, holding the meeting further out from the project’s scheduled completion date.

Memorable Experience

If a group is able to see the results of a major renovation at a familiar property, the “before and after” effect can help to create a more memorable meeting. Pearson’s group had such an experience when walking into the lobby of the Hyatt Regency Chicago, which has completed a $168 million renovation over the last few years. “I think that if you would have brought somebody to the property who hadn’t been there in a while, blindfolded them, put them in lobby and took off blindfold, they wouldn’t have known where they were. It’s that drastic of a change. It gives a new spark to the property,” he maintains. And a good impression can be the start of a business relationship.

Bankers Healthcare Group, for example, will be returning in April to the 424-room Four Seasons Hotel Las Vegas, which had completed a guest room renovation prior to the group’s spring 2014 meeting. “Our owners and customers really liked the feel of (the refurbished rooms), so we suggested going back there,” says Pugh. That kind of outcome certainly means ROI for the renovated hotel, and the renovation itself means a stronger ROI for the group. I&FMM

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