Economy and renovations

2005 was a watershed year in more ways than one for hotels. Flush with cash hotels around the country renovated at unprecedented levels reaching nearly $5 billion for the entire country. The slowing down of the economy has affected some hotel markets more than others with Washington DC beginning to feel the pinch while others like Miami and New York seems to be doing fine overall. Some news sites have already begun speculating on the impact to consumers of a softening of the economy on hotels. MSNBC’s travel columnist Amy Bradley-Hole, states flat out that “service may suffer” as “one of the best ways for a hotel to save money is to slash staff”. Interestingly, she goes on to observe that “Hotels may just come through this slow time looking more beautiful than ever” as “Empty rooms and floors can be shut down completely for quick and easy remodeling projects, and empty parking lots can be repaved. And since contractors aren’t building many new houses these days, hotels can hire them fairly cheaply”. But, historically, the challenge has been to keep cap-ex up going while revenues drop. But if the downturn that followed 9/11 is an indication it might not be too much to expect a continued investment in cap-ex.