Industry Will See An Uptick In Renovations In

NATIONAL REPORT— Purchasing agents are often the best informed about what is going on in the lodging industry because of their close dealings with hotel owners/operators as well as suppliers. As the new year begins, some purchasing executives see a fall-off in business related to new-builds, while they feel renovation activity will be healthier. Vendors and purchasing agents who are reliant on new-construction projects will have a difficult time in 2002, warned William Langmade, president, Purchasing Management International. He cited estimates that show new-construction rooms dropping to 30,000 in the year ahead, compared to 150,000 rooms in 2000, a banner year for the lodging industry. Langmade noted, however, that there is new-construction activity in a number of markets including San Diego, Washington, DC, and Virginia. “In those areas, there are still a lot of units (rooms) coming in, and the international business is doing okay,” he said. On another bright note, Langmade said that hotel companies will be investing in renovations this year. He also noted when the economy heads south, the number of properties changing hands increases. “We’ll see more of that as owners fail to make debt payments. Typically, a new owner will renovate or even switch flags which means more changes. There will definitely be an uptick in that type of business,” he said. Neil Locke, principal, Neil Locke & Associates, also anticipates a good deal of renovation activity. “Projects already engaged continue to be engaged, whereas with other projects, owners are taking a wait-and-see attitude. But they are furthering their goals— going through the budgeting phase, the model rooms phase— and are creatively finding ways The scope of many renovation projects is being scaled back, noted Alan Benjamin, managing partner, Benjamin West LLLP. “A lot of major brands have given franchisees more time to get things done. It’s like it was back in 1991 when they would not do all of the rooms, maybe only 50%,” Benjamin said. Additionally, some hoteliers are opting for a partial refurbishment, he noted. “They might, for example, do the carpet and bed treatment, but not the hard goods; they’d get an extension on that,” he said. Trend To 2Q 2002 Benjamin sees this trend continuing until the end of the second quarter of 2002 or the beginning of the third quarter. However, he warned that there is a danger in not refurbishing guestrooms and public spaces on a timely basis. “The hotels that maintain their quality level will be better off. If they let their image erode, customers may look to another brand,” he said. Overall, though, the purchasing executives are upbeat about the future. Biz On The Rise “Since Thanksgiving, business activity has been increasing steadily,” Locke said. “The weakness now is in the larger portfolios; the first quarter will be very quiet for the Starwoods and Marriotts,” said Steven Higgins, CEO, Higgins Purchasing Group. “But we’re looking for a rebound in the second quarter, and the second half will be great.” “If we can wait out the year… occupancy is starting to climb and 2003 is expected to be pretty good,” Langmade said.