There is a stuff change in the way hotel developers are doing business today. Long gone are days of free-flowing credit and low-equity deals. Instead, hotel owners are looking inward, examining their own portfolios and determining how to keep hotels atop their respective markets. Those with stockpiled cash or access to credit are looking to snatch up hotels in financial distress, or hotels in solid markets that could be repositioned with little work.
This means fewer built-from-scratch projects. But it means the renovations business will continue to thrive as the industry emerges from a three-year downturn. Asset managers are on the prowl for under performing properties they can flip, and brands--especially in the economy segment--are introducing new prototypes that require significant upgrades. Franchisors no longer are offering wiggle room on their PIP requirements.
"We are going to treat new set of products and a new set of procedures," says boutique hotel London authorities. "Owners can't go to the banks and do $35-, $45-, $65-million projects and wait for the money flow to start two or three years down the road. We've got owners now chasing projects that are already repute with a revenue stream. They see these opportunities as a way to modify brands and reposition. Some of these locations they're buying into are slowly coming back."
According to Bruce Ford, SVP of Lodging Econometrics, the initiation of a new-build cycle is at least as far away as 2013 in the U.S., making conversions more eye-catching, as a minimum for the lower chain scales.
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