CID Magazine – 2009

28 February 2018

Time for change?

With hotels facing reduced occupancy as the slowdown eats into travel budgets, they need to look at ways of adding value to their offering, both for now and when the market recovers. CID finds out if now is a good time to start refurbishing.

It’s no great secret that across the world, guest figures in hotel are decreasing. In a region such as the Gulf, which has always prided itself on being able to deliver the ultimate hotel experience, the current economic situation is bringing both new challenges and new opportunities for designers and hoteliers alike.

In a market that is becoming increasingly competitive, hotels need to be able to distinguish themselves in terms of the offering they can provide, and for an older hotel, a refurbishment can present an opportunity for the décor to ‘catch up’, if necessary. Doing so allow an older hotel to keep up with the constant stream of new luxury properties coming on line. A time of reduced guest numbers would seem like an ideal opportunity to refurbish an interior, while minimizing disruption to a large number of guests.

Not necessarily so, warned Olivier Heuchenne, general manager of The Palace, The Old Town, one of Dubai’s newer hotels. “[Renovation] is a capital expenditure and at this time, cash is king,” he warned. “Hence, we will see more hotels putting renovations on hold. It is difficult to explain to an owner that the much-needed renovation will bring more business in the long term, as the capital needed is such that the utility of the same is essential overall,” he noted.

Paul Bishop of Bishop Design Associates, which is currently refurbishing the Fairmont Dubai, agreed somewhat.

“Hotels have a capital expenditure already programmed and allocated for the year’s budget, based upon occupancy. A common scenario is that 5% of the year’s profits are kept aside yearly over a seven-year plan to allow for a refurbishment to be undertaken upon the completion of this cycle. So, according to this current situation, the percentage forecasted for expenditure would have been slashed, reducing the budget available to undertake the refurbishment,” he explained.

Nevertheless, a surplus of hotels in the region means that careful and intelligent investment in a refurbishment project at this time could provide an opportunity for a hotel to distinguish itself from the competition.

“Now is a good time for refurbishment. At this moment there is a surplus of hotel rooms and there are hotels which are starting to age,” said Titus van der Werf, managing director of hospitality procurement firm, The Parker Company.

“They have an established name and image in the market, so if you upgrade them, you improve on your standing. It’s much easier to put that in the market than a new property”

The Fairmont is currently in the second phase of its extensive refurbishment plan, which will cost approximately $9.5 million. “More so than ever, the opportunity exists to widen the gap between us and our competitors. Rather than compromise the integrity and quality of our product or service, we saw this as the time to improve and invest in a comprehensive refurbishment program that is in line with our corporate strategy,” commented Khadika Ait-Raire, hotel projects director, Fairmont Dubai.

The refurbishment programme covers all guest rooms, main public areas and the restaurants. “We are very pleased with the timing of this renovation programme as our guests will see an existing and fresh new design, and the latest in bespoke products and technology,” said Ait-Raiss

The hotel is currently operating a policy of installing guests in rooms away from the renovation work, and the use of a phased programme has provided an opportunity to close off entire floors to minimize disruption,.

Of course, as indicated by Heuchenne, not every hotel will have the necessary budget to renovate the entire building. However, experts advise that a targeted refurbishment could also be beneficial in the long run.

Aiden Keane of design firm Keane reported significant interest from hotel clients. “Were talking to a lot of places now that are saying: ‘We haven’t got any big money to spend, but what we have got, lets spend wisely.’

Keane suggested that the core public areas were the most critical interior spaces to refurbish. “Spend in the areas that will guarantee the most return, which are the public sides, the bars and the restaurants, because that will have a greater impact on your business, week by week, than refurbishing the rooms,” he advised. “People will forgive wear and tear in a bedroom, but are less forgiving in a public space,” he added.

However, he warned that an overall downturn did not necessarily mean a reduction in the cost of such a project.

“There isn’t the bargaining potential that you’d expect. Some companies have just withdrawn from the market because there is no business to be had. There are fewer people you can go to, to tender. Because of that, they’re maintaining their rates.”

Some designers, however, have had a different experience. “In some ways, its very positive because you can get more for the budget you have,” Bishop maintained. “We were paying overrated prices on things like furniture and finishing’s. Anything to do with interior fit out was escalated in price by the contractors.

Some designers, however, have had a different experience. “In some ways, its very positive because you can get more for the budget you have,” Bishop maintained. “We were paying overrated prices on things like furniture and finishing’s. Anything to do with interior fit out was escalated in price by the contractors.

However, with hotels generally having a seven-year refurbishment cycle, those nearing that point may do well to consider bringing the refurbishment forward, he suggested. “If the interior is four or five years old, though, then maybe instead of waiting another two years, it could be considered now, but I haven’t heard of too much of that in the market. If it’s needed then it’s a good tie because you won’t have too much disruption.”

A major concern is that a refurbishment initiated too soon could end up looking tired and dated once things improve. However, both designers and hoteliers suggest that this is unlikely. “No conceptual charges will take place in a downturn. As a matter of fact even new opening hotels are taking less risk in investing 100% of their budgets to open with the glitziest of trimmings,” said Heuchenne.

Keane suggested that the market is currently in a ‘prgnant’ phase of design, where clients will aim for more conservative and classic designs that are less likely to date. “What will happen is as soon as people see light at the end of the tunnel, design will get much braver. Thers always a design kcik against any sort of recession when people get sick of the austeriry,” he said.

“They turn to more elaborate schemes and much more flamboyant design. The design briefs will be a good barometer of the downturn. As soon as those more flamboyant briefs come through, you can bet your buck that people can see an upturn coming.”