U.S. Hotel Capital Expenditures Expected To Reach $7.05B in 2018

The U.S. lodging industry is expected to increase its spending on capital expenditures to a record $7.05 billion in 2018, besting the 2017 record of $6.85 billion. Bjorn Hanson, industry consultant and adjunct professor at the New York University School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism, laid out the prognostication in a recent report.

While total capex spending is projected to climb 3 percent year over year, the cost per available room for those expenditures will be $1,350, which is the same as in 2017. Capex spending describes "costs incurred with the purchase and installation of capital assets to maintain and enhance hotels," according to Hanson's report. Redesigning a lobby or converting a shower-tub into a walk-in shower, for instance, fall under the purview of capex.

Priorities for 2018 and 2019 capex spending include equipment and space design to accommodate enhancements in breakfast offerings; larger or enhanced fitness centers; and increased high-speed internet capacity. In previous years, hotel companies zeroed in on more ambitious areas of capex spend, such as new designs for lobbies and guest rooms; RFID electronic room key systems; and walk-in showers to replace tub-shower units.

Two factors are driving the move away from lofty projects, Hanson said. First, even with record occupancy levels, it's more difficult than ever for hotel owners to drive rate and find room in their budgets for expensive capex requirements to meet brand standards. Second, the recent years of record capex spending may diminish the need for such expenses this year and next because "U.S. room inventory may be in the best condition ever."

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Another trend Hanson noted is that more capex decisions are based on social media comments about the condition, amenities, design and service of a particular brand or property. As such, a larger amount of capex is distributed based on the needs of individual hotels rather than on brand standards.