There are many reasons you should consider a refurbishment, but ultimately, only you know when the time is right. Experts say you should consider refurbishing your hotel every 5-7 years; the practical acid test is when a customer says to you, “you could do with a lick of paint in here” - that’s when you know it's time to get the Dulux out.
It may not seem like the most obvious benefit, but giving your hotel a new lick of paint can boost sales and productivity. By a lick of paint, we don't just mean adorning your walls in fuschia; we suggest a full refurb. New reception desks, new restaurant area, new rooms, this new use of space plus a knack for advertising helps increase productivity by offering potential consumers a brand new. As well as this, it stands to reason that if your hotel looks great, your employees will be more productive because the space around them suits their mindset and way of working.
With companies clamouring for every ounce of space in crowded big cities, it's vital that you make space a high priority when it comes to refurbishing. There are two pretty significant benefits of freeing up space; firstly, as an expanding hotel, it's always helpful to have room in your hotel if you want to take on staff and don’t want to wait around to find somewhere to put them. Having space means you can expand quicker and for less money. Secondly, making the most of the area can make it feel like a brand new hotel, like you’ve moved premises when in reality you’ve just had a refresh and a rethink and are now making the absolute most out of your hotel.
A bright, modern, inviting hotel space can sell a business to a potential applicant before they have even spoken to someone. All companies know that hiring the right people is the most important thing to get right if they want to succeed, so making sure the place they’re going to be working looks as best as it can do (you get the picture - exposed brick, Einstein bulbs, ‘reclaimed’ wood) is paramount. Get the hotel aesthetic sorted and watch the talent roll on in.
Refurbing can seem dull, but it can be fun, especially if you’re involved. Refurbing allows you to put your ideas and feelings about your hotel right into the walls. Use this opportunity to express your brand through your work settings. It doesn't have to be expensive either; there are clever ways of adding a cool touch to your hotel without costing the earth!
Things to think about:
Once you’ve chosen your refurbishment contractor, make sure they give you a detailed cost plan, including all the work and the price of each unit. Never assume anything, folks.
You’ve got to make sure that everyone in your management team is actively involved in the decision-making process, from groundsman to head concierge. Going ahead and making decisions about things that will affect staff members always ends in tears.
Make sure you’ve set aside a percentage of your total budget for contingency, most hotel folks set aside around 5% to be used in an emergency. This is essential, especially if your hotel is on the older side.
Don’t have your head in the clouds before you start splurging on refurbishments. Have a realistic idea of your refurbishment budget and how long you will be paying it back. With today’s unpredictable economy, you must know all the costs; also, resist the temptation to let your heart rule your head. Otherwise, things do start to spiral out of control.
You should give yourself about six months to plan your refurbishment. This gives you time to tick every box, i.e. interview architects, designers, contractors and suppliers. It’ll also allow time for people involved to draw up plans and survey your building.
So now you know why you should be thinking of refurbishing but may be left with questions about the specific financing details. Read on for answers to some of the most commonly asked questions about refurbishment and finance.
FAQ
As the hotel owner, am I personally responsible for this debt?
As a general rule, yes. However, once things get going and you’ve got some confirmed profitability, a decent amount of liquidity inside the company, some unencumbered assets and good credit history - owner guarantees become less essential to lenders.
Must the new debt be secured with my hotel and any personal assets other than the financed equipment itself?
Maybe, it's often a requirement - but it doesn't have to be. The strength of your credit and your hotel's past successes do feature. While bank loans are often approved based on the value of all business assets, equipment leases tend to be secured only by assets included in the lease.
What if my business fails before the equipment debt is paid off? Will I still owe the entire balance, or will the equipment’s resale value cover what is owed?
You should be prepared to pay off equipment loans and leases in total. If the equipment is worth more than owed, sell it after paying off the debt, not before! Don't make selling the equipment your financier's responsibility.
If my hotel is super successful, will I qualify for additional financing if I want to expand again?
Hold your horses! You may qualify. Telling people that you have a great business is one thing, but you have to prove that you have a great business with good payment histories and profitable business concepts - all this will make life easier. If lenders can see that you have steady, profitable growth, additional financing becomes more manageable and accessible.
Should I expect added fees, interest assessments and late penalties when the loan or lease payments are not made on time?
If you don’t live up to the payment terms, all financing contracts generally contain fees, penalties, and added interest. This is pretty obvious and potentially quite expensive. Take missed/late payments seriously, or it could affect your credit score.
Financing is a great way to expand your business and make your money work for you, but it's essential to have a complete picture before committing to a refurbishment.
Got any more questions? No worries, pick up the phone, and we’ll happily answer any queries you might have!
