Hotel Brands Tighten Renovation Guidelines

• Hotel brands have become stricter with property improvement plans (PIPs), but owners and investors can still negotiate.
• Renovations have become a focal point for hotel brands, emphasizing their commitment to maintaining quality standards.

Sean McCracken of CoStar suggests that hotel brands are becoming less flexible about enforcing PIPs, but owners and investors still have some room to negotiate.

Hospitality Real Estate Counselors’ Senior Vice President Chris Stein notes that these changes have created some confusion in the transaction market. He emphasizes that owners and investors need to understand the implications of PIPs when buying or selling a hotel. Misunderstanding renovation requirements can lead to significant financial consequences.

He further explains that property improvement plans typically come into play during two major events: a change in ownership or a recurring timeframe, historically every seven years. However, many hotels have postponed their regular seven-year renovations due to the COVID-19 pandemic. This has led hotel brands to push for a return to traditional quality standards.

Despite the reduced flexibility on PIPs, Stein and Judd Ledet, Senior Vice President of Design and Development at Noble Investment Group, note that there is still room to negotiate with brands. The approach to negotiation should be unique to each hotel, considering factors such as the age of the building and the time since the last renovation.

Ledet also mentioned that some ownership groups are resisting brand-new signage requirements. While new signage can be costly and doesn’t guarantee a clear return on investment, brands see it as essential in signaling shifts and affecting a hotel’s overall perception. While hotel brands are tightening their policies on property improvement plans, there is still room for hotel owners and investors to negotiate. Understanding these policies and navigating them is crucial in the current hotel market.

Discover more at CoStar.