LODGING LEADERS

230 | Funding CapEx: New report tells what it takes for hotels to stay competitive

LODGING LEADERS

More than 20 years ago, a team of hotel industry consultants and asset managers got together to figure out how much hotels in the U.S. spend each year on property improvements and maintenance.

The idea was if owners and operators know in advance what it will cost to keep a hotel property up to date and in good working order, it would help them put the right amount of cash in reserve to deal with the expected ,as well as the unexpected.

In 1997, David Berins and Peggy Berg produced the industry’s first CapEx study. They recommended hotels increase their capital reserves from 3 percent, to 4 percent, to afford pending property improvement plans and inevitable equipment replacements.

Today, that 4 percent is still regarded as an industry standard. But modern day consultants say the reserve benchmark is woefully underestimated and CapEx planning is so much more complex than it was two decades ago.

So how are hotel owners and managers supposed to plan? And by how much?

In this episode, Lodging Leaders explores the latest CapEx report researched and published by two organizations – the International Society of Hospitality Consultants and the Hospitality Asset Managers Association – with the help of STR.

We feature David Berins of Berins & Co., who says he coined the CapEx abbreviation. We hear from Alan Benjamin of procurement firm Benjamin West, who has co-chaired the past several CapEx studies. And we talk to Matthew Hick of Access Point Financial, a specialty hotel finance company that lends for FF&E projects.

Resources and Links

To buy a copy of “ISHC CapEx 2018: A Study of Capital Expenditures in the Hotel Industry” visit ISHC.com.

LODGING LEADERS
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