Survey Says: Optimistic Hotel Cos. Plan Major Renovations

Reflecting hotel owners' growing confidence in the future prospects of the market, 9 percent of hotels plan major structural renovations and 27 percent expect to undertake a significant soft goods renovation in the next 12 months, according to findings released today by the American Hotel & Lodging Association in its 2004 Lodging Survey, measuring responses from 6,200 U.S. hotels across all price points.

Travel buyers generally are pleased when hotels make capital investments in their properties since it means travelers are likely to have a more comfortable, productive stay. At the same time, owners typically use renovations as justification to raise prices, which puts added pressure on rate negotiations.

About 17 percent of deluxe hotels responding to the survey said they plan major structural upgrades, the highest percentage of any price tier. Revenues and occupancy dramatically were affected during the recent industry downturn, so the capital infusion could reflect that owners of these properties delayed improvements until the market showed signs of a rebound. Many hotels in this tier are older and frequently in historic buildings, where renovation can be especially costly.

At the other end of the spectrum, owners of only 6 percent of midprice without food and beverage hotels said they plan significant upgrades. These hotels generally fared better during the downturn, so their owners previously might have made improvements. Also, midprice without F&B chains as a category experienced expansive growth in recent years, so much of the product is relatively new and, therefore, less in need of renovation.