Capital expenditures for U.S. hotels have more than doubled in the last three years. Investments in hotels will reach $5.6 million this year, the first time that much money has been spent on improvements in the hospitality sector since before the beginning of the recession in 2008.
A new report conducted by hospitality consultant Bjorn Hanson, dean and clinical professor of the New York University Preston Robert Tisch Center for Hospitality, Tourism and Sports Management, projects spending for 2013 will total $5.6 billion, more than double the $2.7 billion spent in 2010.
The projection edges out 2008’s $5.5 billion spent and breezes past the $5.1 billion invested last year. After 2008’s high, capital expenditure dropped 40 percent in 2009 and further fell in 2010 by 18 percent, thanks to a decline in most of the metrics by which hotels are evaluated, including occupancy rates, revenue and net income.
“Among the first of priorities are lobbies because that’s the face that guests see,” Hanson says. “Their first impressions are made there.”
In addition, Hanson expects to see hotels provide enhanced guest services by adding more in-room amenities, overhauling restaurants in favor of more casual dining options, improving fitness facilities and redesigning meeting rooms.
“Exhibit spaces have disproportionately been subjected to deferred payments,” Hanson contends. “They’re being made better with better electronics and lighting now because of the deferred maintenance before.”
Hanson notes that this delay may actually benefit event organizers because there is more time to gather information before making changes. Color pallets, wireless Internet bandwidth expansions and lighting options are among the issues being addressed. Audiovisual equipment, however, is not.
“The more common practice is to outsource the AV services, so the cost is being passed on to the guest,” Hanson says. “Thirty to 50 percent of the AV package is rebated or otherwise conveyed to the hotel so it does increase cost, but many meeting planners don’t object because the equipment is newer and the people are trained well.”
According to Hanson, two new trends for hotels now are courting relationships with younger travelers and monitoring what social media is saying about their brands.
“Younger travelers, especially millennials, have a higher propensity to travel as compared to their income—more than compared to both Gen X-ers and baby boomers,” Hanson says. “Millennials respond more to targeted marketing and brand loyalty among younger travelers is high.”
Travelers, young and older, are taking to social media to praise and criticize.
“Social media, more than ever before, is driving the amount of expenditures and also where the expenditures are allocated,” Hanson contends. “From a capital expenditure point of view it helps hotel brands focus on things that are important to guests. There’s kind of an independent check on if money is being spent wisely.”