Critical Property Tasks for Ownership Change and Renovations

PKF Hospitality Research recently reported that 30 of the top 50 U.S. markets are projected to have supply increases of less than 1% during the next two years. Therefore, for most hotel companies that want to grow its guestroom count, it must acquire existing properties. According to Jones Lang LaSalle Hotels in a Hotel News Now report, $14.8 billion in hotel assets changed hands globally in the first six months of 2011. Compared with the same period last year, this represents a 117% increase.

When a hotel is acquired, a renovation usually follows. Specifically, if the hotel is branded, the brand requires the new owner to commit to an “Ownership Change - Product Improvement Program” (PIP). Many new owners also use the sale and renovation as an opportunity to reposition the hotel within the market.

No big deal. Change is good, right?

Sure, but it cannot be overstated how much these changes affect the staff at the property level. There’s only one thing hotel leadership needs to start with in order for the benefits to outweigh the monetary and emotional costs of an acquisition and renovation: a plan.

The following will be useful to both parties; property operations and ownership. Here is a list of immediate tasks for property leadership to complete before, during and after an ownership change and renovation.

Note: This is not a column about “How to Renovate a Hotel”. The below items assume that the renovation plans have been made, including, among other items, architectural design, brand approval, permitting and city/state requirements are met, etc. This is an educational piece directed towards the property leadership on how to thrive during a time of change and how to get emerge from this experience as a better, more complete leader. When successfully implemented, everybody wins.

COMMUNICATION

• Communicate with staff. Sweeping change can create uncertainty among the staff. Uncertainty creates fear. Fear doesn’t create anything – it demolishes: confidence, loyalty and innovation. The GM’s first task is to eliminate any uncertainty. Do this by meeting with your entire staff. But before that, meet with your management team to extinguish any uncertainty or ambiguity. The best way to build confidence is to be confident yourself. In this meeting, set your expectations that they echo your confidence and embracing of these changes. When meeting with your entire team, be honest. Tell them it will be uncomfortable, but you’ll all be better afterwards, with a better team, a better hotel and with more tools to take great care of each other and the guests.
  
  
• Communicate with guests. Alert the guests often and effectively via website, GDS comments and signage at the hotel. The same fear exists in guests when they are uncertain. Don’t allow it. Ensure your front desk staff and reservationists are well versed in the pitch to guests. Also, create a half-page welcome for all guests checking in that details how the hotel plans to keep them satisfied, safe and comfortable during the renovation. Answering questions before they are asked is a sure way to start their stay in the right way.
  
  
• Communicate with ownership. Create a daily report that informs ownership of the project’s events. The slightest of detail may not be important to the property, but remember to think “big picture”. Ownership may be planning more renovations, so they want to learn from the property everything they can to ensure each renovation is easily duplicated. Keeping ownership informed will also add to your level of trust within the organization. Some call it “managing up” – managing the expectations of your superiors.
  
  
• Communicate with brand. If the property is branded, then create a monthly report that details how you are taking great care of the guests during this time of change. The brand representatives will use this to help other properties thrive during these times. Monitor the guest satisfaction scores daily and attack any negative comments about the change or renovation like a 5-alarm fire. Small issues become big issues when left unresolved.

PLANNING and EXECUTION

*Advice from Harvard Business Review (). HBR states that one of the fatal flaws of strategic planning is “dodging strategy review meetings”. HBR continues this point in a best practice blog (http://blogs.hbr.org/hmu/2009/03/four-fatal-flaws-of-strategic.html) saying, “strategic plans quickly become obsolete when there is no activity in place to keep them alive. Worse, managers sometimes feel freed from execution accountability when reviews are continually rescheduled or dropped from the calendar altogether. The most direct way to maintain a consistent focus on strategy is to schedule and hold regular strategy review meetings.”

• Create relationship with renovation contractor. The GM is the link between financial results, renovation schedule, guests, brand reps and employees. Each one of these entities has particular expectations and the one “unknown” is the general contractor. For example, the general contractor (GC) will expect to be aware of any changes to the rooms forecast. Include the GC in the weekly forecast meetings. Treat them as an honorary member of your team.
  
  
• Identify ownership’s top two expectations. These expectations are most likely 1. Renovation is completed on schedule and on budget, and 2. Their property proformas (forecast) are met or exceeded. Plan for the worst and your best will exceed expectations. For example, plan for unforeseen hiccups in the renovation schedule (mold remediation, contractor dispute, slow permitting, changes in the market, severe weather, etc.)
  
  
• General Manager becomes Chief Communication Officer. The GM is the glue that holds everything together and connects ownership with the brand, construction crew, employees and guests. GM needs to set plans for communication and execution of meeting the guests’ needs, details of plan, guest path plan, signage, OOO floor plan/schedule, PR for community, overflow plan for F&B/lobby renovation, decide on PIP needs for bus. Center, IT upgrades, back office, employee areas, etc. There’s much to consider, and important items are often missed.
  
  
• Create immediate “Wish List” of items needed to match the new building. These items are often forgotten, miscounted or just not included. Items are: guestroom and bath linens, guestroom supplies and amenities, uniforms, china/glassware/silverware, marketing material, housekeeping supplies, business center needs/IT, HSIA needs, etc.
  
  *Words of advice from an industry professional. Mark Lynn, President of HVS Asset Management and Strategic Advisory Services (www.hvs.com), in an article he wrote about managing hotel renovations, offers some operational advice by stating, “Assess historical comments from the hotel’s guest base to hear what specific areas of the hotel may be obsolete or in need of modernization. Also, speak with other hotel operators and general managers that have recently completed a similar project and share some best practices.”
  
  
• Complete a new 12-month Rate Analysis and Rate Plan. Create a master calendar; including a review of all holidays, high demand dates and potential blackout or extremely high demand dates, such as college graduation, homecoming, city-wide conventions or other major area events and create a tiered rate strategy. Communicate this plan to the new ownership, along with the new Sales and Marketing Plan for post-renovation RevPAR Growth. A good way to start is to complete a new S.W.O.T. analysis with the help from the Director of Sales and other members of the staff.
  
  
• Create/update property specific website. Implement a Search Engine Optimization (SEO) plan with your IT guru on site or with your corporate office. Announce your new building and updated décor to the world. A “Newly Renovated” note on your hotel front pages, OTA and GDS sites is a significant booking factor for guests. Also, photos, photos, photos. Invest in high quality photos for your website. If time and funds permit, consider a “before and after” video.
  
  
• Have a party! There’s no better way to show off your new hotel (and impress your new owners) than to have an organized, well attended “Grand Re-Opening” party with all of your top clients and community leaders in attendance. If ownership is concerned with cost, allay their fears with a detailed plan including a “creative” budget. Do the following and impress your new bosses with your savvy negotiating skills with vendors and community leaders. First, maximize the attendance by having your local Chamber of Commerce host their monthly networking mixer at the hotel. Then, minimize costs by having your food and beverage vendors supply the goods complimentary, in return for some cross advertising and a moment to address the crowd during introductions.
  
  At the end of it all, when the dust clears, there will be a new property, with ecstatic guests, loyal employees and happy owners. Everybody wins. Wasn’t that the plan?