Master renovation from due diligence to delivery

NATIONAL REPORT — With many industry developers and investors hitting the pause button on new hotel construction due to tight economics, renovations, conversions and PIPs are now on the front burner for hoteliers — and brands — looking to accelerate consumer and revenue momentum across their assets.

How stakeholders can best do that while corralling costs and making sure every aspect will pencil was the focus of a panel of experts speaking on Hotel Investment Today by Northstar’s recent webinar, “Mastering a Hotel Renovation Project: From Due Diligence to Delivery.”

Industry veterans offering a variety of suggestions and vetted solutions were: Patrick McMonigle, senior director, asset management, Access Point Financial; Darrin Phillips, CEO, Top Shelf Project Management; Kara Randall, vice president, luxury and mixed-use development, Hilton; Kellie Sirna, owner and principal, Studio 11 Design; Rob Smith, CEO and president, Stonebridge; and Juan Corvinos Solans, president, HE CALA, Hotel Equities.

Mary Scoviak, custom and design content director, Hotel Investment Today by Northstar, moderated the live Nov. 13, 2025, broadcast, which is now available on demand. Top Shelf Project Management was the topic sponsor. (The company collaborated on the webinar planning but had no influence over the editorial content.)

Here is their roadmap for maximizing ROI in every crucial phase of the renovation lifecycle.

Do the real math that earns lender buy-in

A solid start to a renovation project is understanding its financial scope, McMonigle said. “We're very concerned about the current rising cost environment and how accurately our borrowers are budgeting the renovations. We hire experts (like Phillips) to help us underwrite, as well as monitor, the renovations, so we ensure we have sufficient funds in place to complete the project,” he said.

At a time when “sufficient” could vary with intra-day changes on issues from tariffs to interest rates, McMonigle recommended keeping a clear focus on the actual impact of factors like these on your balance sheet rather than doing the math according to the headlines.

“It's pretty uncertain,” said McMonigle, noting, “A lot of the cost per key is really being borne by products that you're procuring internationally…FF&E isn't all your costs…You’re looking at 20% of your project, not 100%…so, maybe that 20% becomes 5% to 10% in your overall project cost.”

Sirna doesn’t see tariffs impacting Studio 11 yet, although the designer is adding 4% to 5% on average to the contingency. “Our manufacturers have really taken on a big part of this and absorb a lot of the cost…I think as things go on they're going to…have to start forwarding those costs,” she said.

McMonigle added that tariffs aren’t the only concern. “We are seeing cost creep on the projects we do have and we're spending more time on our diligence to make sure we have a realistic project budget and that we're properly capitalized to complete the renovation. All of our loans have renovation completion guarantees. Typically, the equity goes in before we fund our debt portion of the renovation,” said McMonigle.

Ideally, he said, at loan origination Access would like to see a signed GC contract, a purchase agreement for the FF&E and all the hard costs in place. “But in reality, when you're buying a hotel, you're kind of doing your diligence, and that's coming later…in all projects, the…protection is having a healthy contingency. If you have a good 10% contingency in there, you can weather a lot of the bumps in the budget that occur when you start pricing things and the deal becomes real,” he said.

Having collaborators who can identify incremental revenue opportunities can also help smooth out those “bumps,” Sirna noted. “It’s really all about programming and having us come in early on in the process,” she said. To prove the point, she cited a current project where her team created flex spaces that can be transformed to encourage different types of guest interactions and generate potential revenue streams.

Use these best practices to control costs, mitigate risk

Phillips stressed each renovation, conversion or PIP is “really specific.” He pointed out that stakeholders need to understand what the goal of the project is rather than just fixating on an estimated cost per key. “Everybody wants to focus on cost per key, but that's the end of the math equation,” said Phillips.

Being knowledgeable about a project’s scope and leveraging relationships throughout the entire process also are key components to helping tamp down costs. “You have to know the region. You have to know the suppliers. You have to have adequate contingency,” said Phillips.

“Honestly, the biggest thing you can do as an owner is [have] speed. Have the proper team, have the proper funding, because as soon as you start slowing up, you're allowing for market changes that you can't predict,” he added.

Nothing was as unpredictable in recent times as the COVID-19 pandemic, which Stonebridge’s Smith sees as a factor hoteliers are still dealing with when it comes to renovations, or more notably, the lack of them.

“I believe in the next 12 to 24 months, if things ease up and there are a lot of transactions, you're going to see costs go up even more because of the tremendous demand that's going to be created from the pent-up situation,” he said.

Tell a story that gets brands aligned

To brace for that possibility, Smith said one of the most important things for owners is to work with the brands. “Ownership perhaps hasn’t changed, but the timelines have changed. You can get certain things completed at the beginning of that timeline and then taper [to] less guest-focused or guest-touch areas further down the line to make it more palatable for the completion of the project,” he said.

Owners looking to go further, including seeking PIP waivers from their brands, should make sure their requests are “reasonable,” according to Randall.

“I think the brands are flexible, especially as you move up the chain scale. We all understand we're in a dislocated real estate market right now, where ground-up development is very challenged. I think all the brands are very focused on conversions and renovations…I think all PIPs, especially going full service and up, are negotiable to some extent,” she said, and encouraged owners to have experts on their side who understand the validity of the ask and can guide the process.

Smith said in the past 12 months he’s observed the brands looking at GSS scores, how the hotel is being operated and what customers are saying. “[That’s] going to drive leeway and help determine whether or not they give you some of that extra time to get things done,” he said.

Solans stressed the brands have to understand a PIP really cannot be a “desktop PIP” but said it’s up to owners to make their case.

“Somebody needs to walk the property…You need to explain to the brands really clearly what you are trying to do with this asset,” he said, particularly if looking for leniency or a waiver. “A renegotiation with the brands always has to be on reallocation and not elimination,” said Solans.

Randall added if somebody comes with a plan and a vision that’s cohesive and a good end result “that tell your story in an effective way, the brands will come around a lot of times. Having really strong asset managers also is very helpful in things like this and consultants can help you tell that story,” she said.

There's no one-size-fits-all when launching a hotel renovation project, said Phillips. “You're putting a jigsaw puzzle together. The only way you can do this correctly is if you have a good operator. You have to have a good team all the way around…teams that [have] knowledgeable experts in them,” he said.

Randall maintained, “It's a case-by-case basis” for where owners should be putting their CapEx to maximize the return on their investment. “For luxury, we often require two restaurants. We're getting more flexible with maybe allowing a leased space. That’s one way to cut down an owner's expense,” she said.

Assessing the reality of a deal is another key to a successful renovation/conversion process, said Smith, particularly in terms of market share. “If you're going to decide to build a luxury product in a market where there is no luxury product and not just expect the premium rate in the product, but expect to change the customer, that's not the right business plan…we’re really looking at what the current values in the market are, where [the project] would sit in a comp set by location and what we can achieve by the investment to make sure it makes sense,” he said.

Sirna’s seeing owners’ interest in upscaling in her current project pipeline. “I'm getting a lot of owners wanting to elevate their lifestyle project to be considered luxury. So, we're really prioritizing those luxury moments,” said Sirna.

However, she’s also prioritizing elements that drive guest loyalty and ROI. ”The question is, ‘What is the guest going to remember? What is the guest going to take a picture of? How are they going to experience that? And then what moments can go away? As an example, a Thompson Hotel we recently completed, like, the flooring was really beautiful. It was wood and stone, and very expensive. But would guests remember that? For us, the answer was no. So we used large format, through body ceramic tile. It's absolutely beautiful and the cost savings there allowed us to put money into other luxury moments that the guest is going to notice.”

Phillips’ advice to owners to get a grounded, accurate budget that also has flexibility is to “know your asset.” “If you have a good set of documents, you can get a boilerplate AIA contract, change the terms that are applicable to your organization and attach your design documents. You can have a pretty tight contract if you're talking about contractors,” he said, adding, “If you want to have a good estimate, you have to understand what the end goal is of the project…the brands always talk about a cohesive design, but nobody really talks about cohesive project planning.”

McMonigle suggested owners who have the money to renovate should consider doing it now “because there's not a lot of activity and the general contractors are hungry for work. But fast-forwarding, when they start getting a full pipeline, they're going to raise their fees and labor is going to be tighter and it's going to be harder to source your subcontractors.”

And to ultimately get to delivery, Solans emphasized: “Don't change the orders…There’s a scope, there's a timeline and there is a process. Once you've gone through it, unless you have a catastrophe and you have a supply-chain disaster, change orders is what delays every single project in construction.”

Stefani C. O’Connor is a journalist based in New York City.

The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.