Hotel Maintenance: Four Key Areas That will Increase Property Value
By Fred B. Roedel, III, Partner & Managing Member, Roedel Companies, LLC
To maximize the return potential of a hotel investment requires a number of factors to come together. They include building a good building in a good market, developing positive free cash flow via strategic operations and last but not least, maintaining the asset.
The current and long-term value of a hotel asset is ultimately a function of its ability to reliably and consistently produce positive free cash flow. As we all know free cash flow is simply a function of revenues and expenses. If a hotel is not well maintained it will not be able to be a market leader in rate and its operating expenses will ultimately increase.
A proactive maintenance program doesn’t have to be all encompassing all the time, but is a key element when it comes to maintaining the value of a hotel asset. The four maintenance areas we consistently focus on are:
1. Exterior Envelope
If you are a boater then you know there is nothing worse than a boat that leaks. It takes all the fun out of the experience. The same is absolutely true for any building, including hotels. The damage and issues that can result from moisture are well documented and the costs to correct and fix moisture damage can be daunting. About three years ago we were hired to work on a hotel that had moisture issues in the exterior walls. After a significant amount of time and energy was spent investigating the issue, it was agreed that it could only be corrected by opening up all the exterior wall areas, replacing approximately 50% of the steel studs and installing both a new exterior wall and a new interior wall. Had the hotel been well maintained such actions would have been unnecessary.
When we inspect hotels’ envelopes we investigate the following areas:
- Roof systems
Roofs are such an important element to a building that we hire a roofing expert to annually inspect roof systems. This annual inspection allows us to monitor the aging of the roof system. As a result we catch all issues sooner rather than later so the hotels’ roofs last longer than is typical. When it comes to maintaining roofs in top form it is crucial to:
a) Make sure all roof areas are tight. There should not be any missing shingles or separating seams if you have a rubber roof.
b) Review all drainage systems to ensure they are functioning properly. This includes roof top and internal drainage systems and gutter systems
- Vertical surfaces
With the myriad of external systems being used and constantly developed there is always the opportunity for moisture to come through walls. Viewing a surface from a distance substantially decreases the reliability that all issues will be discovered. We believe it is essential to get close enough to the exterior of a hotel in order to really inspect it. We look at EIFS surfaces using a set of binoculars. The binoculars enable us to see any cracks or breaks in the EIFS up close, which are then marked on an elevation plan of the hotel. The result is that at the end of the exercise we have highly reliable scope of work and surface assessment. By doing an exterior system analysis annually we have dramatically reduced the costs of maintaining hotel exteriors.
- Doors, windows and PTACs
Inspecting doors and windows is similar to that of the roof and vertical surfaces. It is essential that all joints between the units and the building are tight. Caulking shrinks and separates over time so look for this. Ensure that all the weep holes in the window frames are clear and functional. If not, water may sit in a window track and over time begin to leak into a building. Similarly, inspect all your PTAC sleeves. Make sure the caulking joint is tight, that the front of the sleeve has a slight tilt upward so water drains back and out of the unit and that the drainage weep holes and lines are working. PTAC units create a lot of moisture on their own and this is an area where more damage occurs than you would expect.
- All exterior joints
As mentioned above, there are a number of areas where caulking is responsible for maintaining a water tight seal between two dissimilar surfaces. Since caulking does break down and shrink it must be inspected annually to ensure that it is serving its purpose.
None of the above is a difficult task, but the penalty for not inspecting and maintaining your hotel’s exterior envelope can be significant. I mentioned earlier that we were hired to work on a hotel that had moisture issues in the exterior walls. The cost of addressing the moisture issues, which had not been addressed for a period of time, was approximately $2,500 per key, over $300,000 total. The cost for us to annually inspect and maintain a hotel exterior averages between $5,000 and $7,500, a far better return.
2. Mechanical Systems
The mechanical systems within a hotel are often one of the more expensive parts of a building. They include all HVAC systems, guestroom PTACs, commercial and guest laundry, elevators, kitchen equipment and pool water systems. Engineered and specified properly, these systems are built to operate for a long period of time. To realize their full operating potential requires a proactive and dedicated system of maintenance and evaluation. The maintenance is typically quite straight forward. It includes regularly changing filters and getting the internal elements cleaned and checked annually. It is also worthwhile to take the time to understand how much energy the systems should typically be burning. By knowing how much electricity a specific hotel generally uses, we are able to notice fluctuations in usage, which could indicate that one of its systems is not functioning properly.
Maintaining mechanical systems is also very important to any future buyer since it can be a significant capital investment to have to replace or upgrade any one of them. Unfortunately, we have experienced too many situations where designers did not always envision the need to take out and replace big mechanical units. As a result the investment to replace them may also include costs like removing and reinstalling walls to accommodate the movement of equipment. Similar to the exterior of the building, a small annual investment to maintain the mechanical systems will improve annual cash flow by keeping costs down and increase the long-term value of your hotel.
3. Interior Fit & Finish
The third area we focus on is the interior finish of a hotel. Customers’ perceptions of your hotel, which we call ‘Moments of Truth’, are always directly related to what they are willing to pay for their stay. Staying on top of the condition of paint, wall vinyl, floor surfaces, doors, windows and security systems is far cheaper than it is to do major repairs or replacements. Maintaining your fit and finish will also dramatically reduce your operating costs, keep your hotel within brand standard and elongate the time these areas work for you versus against you.
4. Exterior Grounds
The last big area we monitor is the exterior grounds. Maintaining the exterior grounds of a hotel is necessary in order to keep up a first class appearance and to manage potential insurance and claim costs. Parking lots need to be resealed regularly (bi-annually usually) to keep the surface from deteriorating beyond repair. Also keep an eye on situations like sink holes that can develop and be hazardous to guests. In addition, we include the following in our annual reviews: sidewalks, irrigation systems, landscaping, external lighting systems, building and property drainage systems, fences, gates and any out buildings. The outside of your property is the first thing customers see and it is as important to maintain it as it is to maintain the interior of the building.
Many of the points above may seem self-evident. If, however, you do not have a process for regularly inspecting and maintaining your hotel property in place or have not hired a firm that specializes in doing so, items will be missed which will negatively impact your current operations and free cash flow as well as your hotel’s long-term value.
Mr. Fred Roedel is a Manager of Roedel Companies, LLC along with his brother David. He shares the responsibility of developing and implementing the annual strategic plan of Roedel Companies. He also shares the responsibility of approving the final design, budget and timeline of any asset developed. Mr. Roedel is President of ROK Builders, LLC, the wholly-owned Construction Management subsidiary of Roedel Companies. In this capacity he is responsible for developing the strategic and annual plans of ROK Builders. Mr. Roedel, III can be contacted at 603-654-2040 ext. 105 or FredRoedel@roedelcompanies.com Extended Bio...
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