What is a Hotel Property improvement Plan?
A hotel property improvement plan or PIP is an action plan for a hotel to bring it into compliance with brand standards levied by the brand manager or franchisor. The plan can call for improvements to things such as exterior upgrades and repairs, amenity upgrades, furniture/fixture room changes, lobby and elevator cab, ADA compliance or safety advancements. Usually a timeframe for making the improvements is negotiated.
Why Are PIPs Important?
PIPs are meant to improve guest satisfaction and boost competitiveness and attractiveness of the hotel. The enhancements are meant to increase market share and drive occupancy and room rates while reducing operating costs, enhancing profit and increasing the value of the hotel.
PIPs are sometimes used as a corporate weapon by brand franchisors to force hotel owners to improve the quality of the property, switch brands or sell their hotel.
In most cases, updating guestrooms and public areas allow a hotel to be more competitive both for transient and group demand. If a PIP gives a hotel a chance to stand out among the competition, it can reward the owners with a greater market share and increased customer satisfaction, and thus a greater profit. Hotels are always looking to create those “instagramable spaces” within their hotel.
From a strategic standpoint, property improvement plans are essential to improve guest satisfaction and enhance competitiveness. These improvements are intended to increase market share and drive both occupancy and rates, while reducing fixed expenses. The ultimate goals are to enhance operating profit and asset value.
What Goes Into a Property Improvement Plan?
Hotel PIPs can address physical aspects like mechanical systems, electrical and plumbing systems. They can include upgrades to corridors, guest room carpeting, furnishings, fixtures, wall coverings and wall art. They may require enhancements to the fitness center, business centers, lobbies, meeting rooms and ballrooms, elevator cabs, and the arrival experience. Some hotel PIPs may even include communication and security system upgrades, and reconfiguring restaurants, parking, exterior lighting and landscaping all of which can be costly.
Why Are PIPs So Costly?
The ongoing rise of hotel brand options and competition within key markets has contributed to rising PIP costs, as parent hotel brands seek to differentiate consumer experiences at each of their sub-brands within a given property type.
Parent hotels brands are going to greater and greater lengths to differentiate their brand and sub-brands from the competition requiring hotel owners to enhance properties with various upgrades, and changes to in-room décor, restaurant experiences, services, corridors, parking and lobbies.
The total amount of work required to meet brand standards under a PIP can vary tremendously. These factors typically depend on the property condition, length of time since the property’s prior renovation and recently enacted brand standards.
Other Considerations of PIPs
- A hotel PIP is a negotiation. With the pandemic greatly affecting the industry there may be room for more compromise and concessions.
- Get a professional to help you quantify the costs of the PIP so you know the various expenditures of each line item.
- Identify subjective items and look to value engineer them. Also conduct an inventory of each room’s condition to see if exceptions to the PIP can be made based on actual condition of the room.
- Schedule the work in low season and work with contractors who can keep a tight budget and timeline. Every day a room is lost to occupancy is money out of your pocket. Choose your contractor carefully!
Planning for, examining, knowing the “real” costs and negotiating hotel PIPs can significantly help owners of hotels reduce their costs and increase their returns. Seek out experienced professional help, like the Ultimate Owner’s Reps at DAE Group, to help you successfully navigate this complicated journey.