The ROI of Good Design
By Roger G. Hill, Chief Executive Officer & Chairman, The Gettys Group Inc.
This year, we've seen the pendulum swing on the stock market. Hotel owners are feeling bearish and wondering whether they should exercise caution as we approach 2008. It's easy to understand why. According to PricewaterhouseCoopers LLP, the tie between the economy and the hospitality industry is extremely high. The correlation between lodging demand and the U.S. Real GDP was 1.2 for 24 consecutive years from 1967 through 1991. If the economy grew by one percent, then the lodging demand would increase by 1.2 percent. If the economy sees growth, the hospitality industry is up, but if the economy is in a slump, the hospitality industry slides as well.
It's clear why the overall economy and hospitality industry are so strongly correlated - a struggling economy stops many people from consuming luxuries. Extended vacations are among the first expenses consumers cut. Corporations also are decreasing travel budgets, as they tighten belts in uncertain economic times.
Rather than trying to predict the market, hoteliers can look into the future and make investments that set the stage for explosive growth when the economy takes off. Instead of reacting to today's economy, hotel owners can prepare for tomorrow's.
Today's marketplace offers hotel owners a perfect opportunity to work on projects they put on the back burner early, as contractors and suppliers lower building costs in response to dwindling demand for their services. The cost of labor and materials decreases right in line with the economy. As an hotelier, you can take advantage of the economics of an uncertain market.
A hotel owner benefits from redesigning space and offering guests a more luxurious, convenient, and modern experience. Even small upgrades affect a guest's experience at your hotel - and large-scale remodeling gives your brand a fresh, modern feel. Positive reviews come in, and your property sees an increase of bookings. Before you know you it, you're reaping the rewards of investing in good design.
First, hotel owners, especially franchisees, should consider infusing their brands with unique touches typically associated with boutique hotels. Design and interior architecture differentiate a hotel in its marketplace. The redevelopment of Hotel Cass - Mag Mile on Wabash Avenue in Chicago is a perfect example of the positive effects of merging an established brand, Holiday Inn Express, with the features of an historic hotel. Hotel Cass - Mag Mile, which originally opened in 1927, recently underwent a complete transformation. Molded after the Beaux arts feel of the original structure, the hotel is a modern reinvention of a historic property. Design elements, such as luxury bedding, hi-tech lighting, 32" flat panel televisions, and complimentary Internet give Hotel Cass - Mag Mile an upscale feel and launch the hotel as a major competitor in the Chicago hotel market. The result is a look and feel the average traveler wouldn't expect of a Holiday Inn Express, yet the standard of service that distinguishes the brand is uncompromised.
The owners of Hotel Cass set an example that any hotelier can follow to realize a substantial return on investment for upgrading or redeveloping a hotel. Understanding the competitive advantages of your hotel, while consciously making design choices to complement and enhance your brand lead to a stand-out property. Hotel designers offer more than creative input, they help you leverage the key features of your property and can even help owners maximize the infrastructure of their hotels.
For instance, a great designer can help owners understand the value in investing in behind the scenes infrastructure improvements, such as HVAC system upgrades. Interior design begins with a hotel's essential systems to ensure design and architectural features are used to their best effect for the long term, while having a significant effect on guest satisfaction. The look of your hotel and the back-of-the-house operational function work in tandem.
It's also important to keep in mind that you don't have to spend a fortune to reap rewards. Good design is smart design. Often the best sources for art and finishes aren't the most expensive. A local artist adds more interest and personalization to your hotel than an often-imitated "known" artist. Likewise, subtle high-tech touches, like iPod docking stations, set a property apart without substantially increasing the overall project cost. These small features add value to your guestrooms without breaking the bank.
Another high-reward investment for any hotel is sustainable design. Although hotel owners often fear the costs associated with building a green hotel, the cost differential for green products has substantially come down. Great designers incorporate green design solutions from the start of a project, which can dramatically reduce the implementation cost by allowing more time to source materials and work out cost-effective design solutions. In addition to the feel-good factor for both the owners and the guests, the long-term investment return of green design, evidenced by lower energy costs and better guest reviews, far outweighs the incremental differences in upfront costs.
The time is ripe to invest in your hotel and capitalize on good design. With drops in occupancy rates predicted by some analysts, hoteliers have the time and opportunity to make similar adjusts to their property, and they can avoid disrupting as many guests in the uncertain economy. Owners can take time out to undertake renovations that require major area shutdowns. There is no better time to section off a portion of your hotel then when the demand for that space is low. Stepping back and analyzing the effect of renovations and incorporating impressive design components can aid hoteliers as they work to improve the appeal of their properties. While the cost of renovations may decrease your bottom line at first, the end result will pay off once your customers begin reaping the benefits of the improvements.
There is a substantial return on investment for hotel owners who choose to utilize this time to improve their property and capitalize on the opportunity to embrace new design. When the economy experiences its next upswing, you can look at the rise in ADR, occupancy rates, and, most importantly, construction costs, and be happy you took advantage of the situation when you did.
Nearly 25 years ago, Roger Hill co-founded Gettys, a Top 10 hospitality interior design, procurement and development firm. Under his leadership, Gettys has grown to a global team of business-minded professionals who specialize in hotels, resorts, spas, casinos and mixed-used developments the world over. A respected industry veteran, he is frequently called upon by hospitality and business media outlets to provide insight into the redevelopment, renovation, and repositioning of hotels. A graduate of Cornell University, Roger has served as an appointed delegate for the White House Conference on Small Business, and is a member of ULI, YPO and ISHC. Mr. Hill can be contacted at 312-836-1111 or firstname.lastname@example.org Extended Bio...
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