NYU Dean: Hotel CapEx levels to break records in 2013

Hotel owners are opening their wallets this year, spending money on long overdue capital expenditures that were deferred during the Great Recession. This according to new research from Bjorn Hanson, divisional dean and clinical professor of the New York University Preston Robert Tisch Center for Hospitality, Tourism and Sports Management, who tells GlobeSt that total monies to be spent on improvement at hotels in 2013 will reach approximately $5.6 billion, exceeding the prior record levels reached in 2008.

The increase in 2013 is forecasted to be 107.4 percent over 2010’s $2.7 billion. There were decreases of 40 percent in 2009 and an additional 18-percent decline in 2010 in response to decreasing occupancy, average daily rate, revenue per available room and profits in 2009.

According to Hanson, this year’s expenditures reflect deferred items and the requirement many hotels are facing to meet new standards. Many brands and management companies waived new and existing requirements involving capital expenditures to help owners through the lean years, but they’re now mandating the changes, GlobeSt. writes.

“Owners can no longer say ‘that’s not a reasonable request,’” Hanson tells GlobeSt.com. However, some owners are still skittish to shell out money on CapEx, leading to them “negotiating the timing of the expenditure.” Such hoteliers, GlobeSt, writes, "are looking to be conservative either because they’re not yet in the clear or because, in spite of healthy occupancy rates and ADR levels, profitability remains weak."

“Owners are getting close to what their earnings were before but that doesn’t mean they want to spend yet,” Hanson says. Industry profits as a whole are expected to jump by 10 percent to 15 percent, setting a new record.

Most of the changes being requested by hotel companies involve improved guest amenities and services such as high-speed Internet access and increased capacity, enhanced complimentary breakfasts, check-in/check-out kiosks, redesigned business centers and lobbies, in room iPads, reconcepted restaurants, added or enhanced fitness facilities, in room iPads and a number of in-room design upgrades.

Hanson adds that social media is a major factor contributing to added CapEx. “This is the first year I’d say this: the risk of having negative comments is too much of a risk,” he says. “If it shifts even 2 percent of market share and ultimately warrants the need to offer discounts, it was an unwise choice by the hotelier not to make the expenditure.”
 

 

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