Add value to an existing asset
Rising building material costs aren’t just hitting hotels. Soaring inflation, rising cost of debt and rising wages have led to construction delays in property markets, according to JLL’s 3Q22 Capital Tracker.
Likewise for hotels, high costs, which have exceeded pre-pandemic levels, undermine the feasibility of new developments, says Nijnens.
This has prompted investors to turn to value-added investment strategies, which require a keen eye and a diverse skill set to identify and execute.
“Achieving a value-added redevelopment is, in many ways, more complicated than building a new site with new specifications,” says Nijnens. “An older asset is often more difficult because you need to determine the condition of the existing asset, where to prioritize, whether it can be more durable, and consider what customers are looking for.”
Common value-added improvements for hotel assets include rebranding, increasing the number of rooms or repositioning, which may involve introducing a lifestyle-focused concept with higher turnovers off rooms, and the conversion of underutilized spaces into rooms or food and beverage (F&B) concepts.
These asset improvements must take into account changing customer trends, such as average length of stay, customer type, or the blurring of lines between business and leisure travel, and its impact on design overall hotel, according to Nijnens. .