Property improvement plans remain top of mind for many hoteliers early into this year, but brands may not be as rigid in their expectations as we once thought. Hotels across the U.S. are drastically in need of a refresh, but brands are more invested in making the right design decisions throughout 2024 rather than rushing into a refresh that is outdated or inefficient. This could be a short-term trend, but it could buy some well-meaning hoteliers time and efficiencies down the line; that is, if they are willing to discuss the issue with their brand contacts.
Hotels, by and large, have lagged behind in keeping up with wear, tear and guests’ expectations over the past two years. According to data from STR, average daily rates were roughly $156.62 for the week of Feb. 24, 2024, up just .3 percent from the year prior. With rates this high and retaining their strength for so long, it should be no surprise that guests expect the best once they arrive on the property.
The supply crisis impacting development materials and labor is a thing of the past. Today, the biggest challenge is the high cost of debt and the relative uncertainty of things to come. For better or worse, 2024 will be an eventful year. Business owners are contending with the highest interest rates in nearly a decade and the long march toward an election in November. Hoteliers are also concerned that the industry’s aforementioned rates may fall off at some point due to any number of factors, and this impacts forecasting and expectations for the near future.
Delayed PIPs are often welcomed by hoteliers, but this extra time between refreshes can be a double-edged sword. The longer a property goes without a refresh, the more tired it can appear. Realistically, costs are also resisting pressures to lower. If hoteliers are hesitant to address PIPs due to concerns about pricing, waiting them out isn’t going to help their situation. Instead, it will widen the guest experience gap between their hotels and their competitors.
Regardless of these trends, the hospitality industry anxiously awaits any downward movement in Federal interest rates. Should the Fed budge, it will trigger active development as every point it drops is delivered directly to a hotel’s bottom line. If hoteliers approach brands with a plan to alter their PIP rather than delaying it, they will likely be more successful. They may have a chance at moving their PIP's goalpost if they bring a plan, are realistic about budget goals and prepare to compromise.