It’s important to fully understand the problem before committing significant capital
By Tom Baker, AHA Hotel Consulting
Over the years, I’ve found that one of the most common assumptions hotel owners make is that declining performance automatically means the hotel needs a renovation. In some cases that’s true, but a recent engagement reinforced why it’s important to fully understand the problem before committing significant capital.
The owner had already begun discussing renovation options because occupancy had softened and profitability was below expectations. Before offering any opinion on the renovation itself, we spent time evaluating the operation, financial performance, competitive positioning, and overall condition of the asset. What we found was that while certain areas of the hotel would eventually benefit from renovation, the issues having the greatest impact on profitability had very little to do with the physical product.
There were opportunities to improve revenue management, pricing strategy, labor productivity, sales execution, and day-to-day operational consistency. None of those issues would have disappeared simply because the guestrooms had been refreshed or the lobby had been updated. The hotel certainly would have looked better after the renovation, but there was little reason to believe profitability would have improved in the same proportion because the underlying operational issues would still have existed.
That engagement reinforced something we’ve seen many times throughout our careers. Owners sometimes mistake a visible problem for the most important problem. A dated guestroom is easy to recognize. Weak revenue strategies, inconsistent operational execution, or ineffective sales efforts are much less obvious, yet they often have a greater impact on financial performance.
This isn’t an argument against renovations. Many hotels genuinely need capital improvements to remain competitive and protect long-term asset value. The point is that a renovation should be part of a broader strategy rather than the starting point. Before investing significant capital, owners should have a clear understanding of why the hotel is underperforming and whether the proposed investment addresses the root cause or simply improves appearances.
We’ve evaluated older hotels that consistently outperformed newer competitors because they were well managed, properly staffed, maintained with discipline, and positioned effectively in their markets. We’ve also seen recently renovated hotels continue to struggle because the operational fundamentals never changed. New furniture doesn’t solve pricing problems, improve guest service, or create accountability within an organization.
One of the greatest values an independent consultant can provide is an objective assessment before major decisions are made. Sometimes that assessment confirms that a renovation is exactly what the property needs. Other times it identifies operational improvements that should
come first, allowing ownership to improve profitability immediately while making smarter decisions about future capital investments.
At AHA Hotel Consulting, our three principals each bring approximately 30 years of executive hospitality leadership experience. Although every property and every market is different, one lesson has remained remarkably consistent throughout our careers: the best investment isn’t necessarily the largest investment—it’s the one that addresses the real problem.
The AHA Takeaway
At AHA Hotel Consulting client satisfaction is a critical component to our success. Building strong relationships and producing positive results are core principles for our business. The owners of the Modernist Hotel recently shared a positive review on the AHA online business listing that reflects the importance of building these core principles.
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– Tom Baker, Managing Principal