The power of PIPs
The International Society of Hospitality Consultants (ISHC) produces an annual capex report. Its 2023 study suggests that over the last 10 years hotels spent 8 per cent of total revenue on capital expenditures, and/or Property Improvement Plans (PIPs). for branded hotels, according to Carrie Russell, senior managing partner at HVS Canada.
“While this is stated as an annual 8 per cent amount it is usually spent in chunks, with a softgoods renovation every 5 – 7 years and casegoods renovations every 10 – 12 years. There are also mechanical and structural issues that require capital, but those tend to be based on life expectancy of the item and longer 20+ year time horizons (roof, boilers, HVAC, plumbing, electrical etc),” adds Russell.
Curtis Gallagher, principal, Canadian hospitality lead at Avison-Young concurs, adding: “PIPs are generally 5 to 9 per cent of revenue over that period depending on the brand. This expenditure reflects the cost to sustain current hotel performance over the next cycle. ROI projects and any building structural or site costs are above the PIP amount.”
In the Canadian hotel industry, maintaining a competitive edge is important for sustainable growth and long-term success. One strategic tool for driving this progress is the renovation PIP, which serves as a blueprint for enhancing hotel properties, revitalizing business operations, and securing a brand’s future in the market.
A PIP outlines a comprehensive set of renovations, upgrades, and improvements that a hotel property undergoes to meet brand standards, enhance guest experiences, and adapt to evolving market trends. While they may also be perceived as a financial burden, PIPs offer substantial benefits that outweigh their costs.
PIPs play a pivotal role in fostering growth within the hotel business. By investing in renovations and modernization, hotels can attract new customers, retain loyal guests, and increase revenue streams. Upgraded facilities, refreshed aesthetics, and enhanced amenities elevate the overall guest experience, resulting in positive reviews, word-of-mouth recommendations, and higher occupancy rates.
PIPs are essential for maintaining brand consistency and integrity. In a competitive market, brand recognition and reputation are invaluable assets. By adhering to brand standards and implementing PIP requirements, hotels align themselves with the brand’s identity, values, and quality benchmarks. Consistency across properties fosters trust among consumers and enhances brand loyalty, driving sustained business growth.
PIPs position hotel brands for future success by ensuring relevance and competitiveness in the market. In an era of rapid technological advancements and changing consumer preferences, adaptability is key. PIPs allow hoteliers to stay ahead of the curve by incorporating innovative technologies, sustainable practices, and experiential offerings that resonate with modern travellers. By future-proofing their properties through PIPs, hotels can remain agile and responsive to industry shifts, safeguarding their relevance and profitability over time.
PIPs contribute to the overall improvement of the Canadian hospitality landscape. By elevating the quality of hotel properties and guest experiences, PIPs raise the industry standard and drive positive economic impact. Enhanced hotels attract more tourists, stimulate local economies, and contribute to job creation, benefiting communities across Canada.
By embracing PIPs as strategic investments rather than mere expenses, hoteliers can unlock new opportunities for success, elevate guest experiences, and strengthen their position in the market. In the ever-evolving world of hospitality, embracing change through PIPs is not just a choice but a necessity for long-term prosperity.