The process of converting an existing property, while maintaining brand standards, can be daunting, but proper planning will ensure success.
Major hotel companies have been refining their new construction prototypes during the past few years. The idea is to provide a better guest experience while being more cost effective and with a quicker build time than with previous designs.
That’s good news, but when it comes to adapting an existing structure, efficiency and a fast path to opening may take a bit more thought while trying to meet brand requirements. Here are a handful of things we have learned from decades of experience that can help an owner achieve the brand objectives when looking at conversions in their market.
Certain markets are better for conversions
Markets that have a high barrier of entry provide better opportunities for a conversion due to the complexity of the planning approval/entitlement process for new construction. Adding this time element with the length of time it takes to construct a new hotel can tie up a site for between two and four years before the hotel opens and starts creating revenue. On a conversion, there is typically a structure already in place with a physical plant that may be able to be repurposed.
With major hotel companies looking to get quality products online quickly, a great location with an adaptable structure can provide an alternative to having to wait years to be in a certain marketplace.
However, sometimes the path to a speedier open is going with a brand that may not have been your first choice, but in the end, could be the smarter choice. With each brand having its own specific requirements, there could be some components in the existing structure which may not be feasible to modify. For instance, the size of the guestroom, lack of existing meeting space or a brands requirement for a central HVAC versus the use of PTACs could prove to be prohibitively costly to change. This inability to meet the brand standards may require selecting an alternate brand from the same franchising company or seeking out another franchise.
As major companies continue rolling out new concepts, the franchisees understand the need to reach critical mass and to provide opportunities to convert to these newly created brands. While it would be optimal for all new brands to be the prototype, the ability for brands to show large numbers of quality sites in the development pipeline provides a mechanism for faster growth, while also providing a more valuable asset for owners and potential owners. Typically, with a conversion opportunity, the franchise company provides guidance to help select the right brand for the asset.
Once a new brand is selected, the franchise company creates a change of brand property improvement plan. This is an essential part of the conversion process, and will become part of the franchise agreement. The scope of the PIP includes modifications the franchise company requires the ownership to make for the asset to meet the brand standards. The cost of this work will help an owner determine if spending this amount of money will create a rate increase and a value-add substantially greater than would be the case if he current asset was kept “as is.”
If the conversion meets the desired ROI, an important next step is to set up a meeting with the brand and a designer familiar with the brand to ensure everyone has a unified vision for the project at a feasible cost. Here, the brand can provide valuable insight to give designers a clear understanding of the key components.
This session is an opportune time to discuss value engineering elements and possible waiver opportunities to lower the overall costs, while still working within brand-specific standards and parameters. For example, a brand request to change all guestroom doors could be a costly endeavor. Rather than replace them entirely, perhaps refinishing them with a new color is a valuable solution.
Typically, as with all PIPs, a multi-part design process is required to ensure the brand is satisfied with the future outcome of asset. This process begins with schematic designs being presented to both the brand and owners for comments. When approved, design development documents are created which feature highly visual images, specifications and floor plans. Once these documents are approved by the ownership and brand, construction drawings are completed, which allows the project to be permitted, contractors to provide their proposal and the procurement team to order the new FF&E and OS&E.
At this point, a decision should be made as to whether the hotel should stay open during the brand reinvention or close for a specified period. If the thought is to close entirely, it is important to research any jurisdiction’s compliance requirements. Closing an asset for an extended period of time could result in the building needing to be brought up to current codes. This may not be enforceable in an operating asset. Once this decision is made, the conversion process begins.
Updates and communication
Throughout the construction process, it’s extremely important to keep all team members involved, including the owner, brand, designer, operations team, contractor and procurement team. At different intervals during the conversion, there are requirements which all parties will need to be involved with and each will be required to perform certain tasks to make the hotel a success.
For instance, the PMS, IT, OS&E, FF&E, training and signage changeover will need to be coordinated. Other project elements, as well as the quality and standards, need to be constantly reviewed and the schedule continually updated accordingly. In addition, the operations team may be required to obtain certain certifications.
Overall, the process may seem daunting and stressful at the onset. However, proper planning and having a good project manager that is experienced with conversions in the lodging space and that has a good team will help ensure a successful outcome.
Stephen Siegel is principal of H-CPM (Hospitality CPM) where he is responsible for managing his team of professionals in all aspects of renovations and construction. His experience and knowledge with managing projects is comprehensive; from the early planning stage to final completion. He is a proven professional in the areas of design, engineering, contractor negotiation and project management for new construction and renovation projects. He earned both a Bachelor’s and Master’s Degree in Construction Management from the University of Florida.
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