Investors look to flex-space design to boost bottom line

NEW YORK CITY — For investors and owners, driving profit into their hotel and resort assets has become much more than just maxing out the number of heads in beds. It’s now become taking that same thought process and applying it across the square footage—in some cases, acreage—of their properties to create an environment that helps produce cash flow via any number of revenue generators, all while ensuring guest satisfaction remains a priority.

How this could be accomplished was up for discussion earlier this week during the 46th annual NYU International Hospitality Industry Investment Conference held at the Marriott Marquis. The “Design for Profitability” session featured insights from Joe Piantedosi, EVP/Asset Management, Park Hotels and Resorts; Edward Hoganson, EVP/CFO/CIO, Crestline Hotels and Resorts; Ben Brunt, managing principal/CIO, Noble Investment Group; and Steen Petri, managing director/Investments, HEI Hotels and Resorts. Aaron Anderson, founder of The 26 Co, moderated the panel.

While acknowledging the necessity of staying current in markets via new FF&E and refreshed product, the finance executives voiced it was equally important to assess the potential of assets to generate income beyond the guestroom.

“Whether it’s a reno or a new build, our goal is to activate as much of the public-area component and try and figure out a way to create revenue-generating spaces. We’re very much into compact, efficient use of space and figuring out different ways to drive revenue,” Brunt said.

Anybody can do a room renovation but [the end goal is] how do you take underutilized, under-appreciated space and find a way to capitalize it to make it more useful for the guest—what the guest wants—and then ultimately for us, more profitable.

Joseph Piantedosi

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Noble will be doing this with its 153-key Tempo by Hilton, a ground-up project in the historic district of Savannah, Georgia. It worked with Hilton and its coffee partner, Bluestone Lane, to create more than a coffee bar. “We’re including an entire Bluestone Lane concept. It’ll be open to the public. For our hotel guests it’ll act as the breakfast area and we’ll have grab-and-go throughout the day, but it’ll feel more like a market than any kind of a traditional hotel offering,” Brunt said. “We like introducing what we feel is something that’s very authentic.”

F&B has long been seen as a way to monetize portions of a property’s square footage, with the insertion of celebrity chef restaurants into hotels a prime example. While boldface names can draw both guests and locals, Park’s Piantedosi felt such restaurants “can be a double-edged sword. Sometimes the economics of those work out in a market, sometimes they don’t.”

A better opportunity, he suggested, often lies in taking what exists and reconcepting, repositioning, rebuilding or reconfiguring it. “In Key West, we had a beachfront, prime real estate, dilapidated shack of a bar that did fine. We recognized we could knock it down, rebuild it double the square footage, double the seating, put a second story rooftop bar on it that could be both bar seating and event space and probably do [two times] the revenue with a similar footprint just by building it right,” Piantedosi said.

Similarly, an underutilized boardroom at the same property was reinvented as a bridal “get-ready” room. “We sell it for five, six, seven thousand dollars on a Saturday wedding,” Piantedosi said. “Anybody can do a room renovation but [the end goal is] how do you take underutilized, under-appreciated space and find a way to capitalize it to make it more useful for the guest—what the guest wants—and then ultimately for us, more profitable.”

Crestline’s Hoganson stressed it’s important for owners to strongly consider their manager’s opinions and work with them. “It’s not a one kind of solution fits all; markets are very different. In some markets we’re looking at how to add a rooftop pool… in other markets we’re actually looking at taking out the pool; it’s not the right fit for that location. In a downtown Chicago hotel, we’d rather take out the pool, turn it into meeting space, save costs on the engineering side and create revenue generation,” he said.

“We spend a lot of time with our operations folks getting them involved,” said HEI’s Petri, noting it’s important to learn what the asset’s space is like. “It’s one thing when you underwrite a hotel, you see it, you have an idea but to truly drive profit you need to own it for a period of time. You have to start thinking about how do we utilize this and is there more than one way of utilizing these spaces? And then getting the right designers involved who can create a space that isn’t just good for one purpose… That takes a really good collaboration between designers and operations, and ultimately, we’re going to price it out.”