By Andrew Cameron, Associate, Besen Hotel Advisory Group
When owners are due for a significant Property Improvement Plan (PIP), they must carefully evaluate what the best course of action is. Over the past five years, major hotel brands have become significantly more flexible with their PIP schedules.
However, with renovation costs rising sharply, hotel owners are increasingly questioning whether these investments genuinely enhance their property’s return on investment (ROI). In theory, a $10 million investment in improvements should increase a property’s value by the same amount, but the reality is often more complex. Factors such as market conditions, competitive positioning, and guest perception all influence whether an investment truly delivers proportional value. Additionally, shifting consumer expectations and evolving industry trends can further complicate the equation, making it essential for owners to take a long-term strategic approach.
Understanding this, seemingly all hotel groups including Marriott, Hilton, IHG, Hyatt, Choice, and Wyndham have introduced conversion brands to attract hotel owners who are looking for options when they are due for a significant PIP. While this costs significantly less than building from the ground up, many conversion brands are still building consumer recognition, which can impact overall demand. Some guests might opt to stick with the brands they know and trust. After all, that is what the franchise model is based on.
A well-executed PIP or conversion can enhance market competitiveness, but a misstep could lead to diminished returns. Beyond financial consideration, owners should assess operational efficiencies, potential shifts in target demographics, and long-term brand alignment when making their decision. As the hospitality landscape evolves, understanding your options and how to position your asset for continued success becomes crucial.
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Andrew Cameron