Our recent hotel SystemsPro team travels took us to two top brand conferences, where we demonstrated tools to help keep properties up to par and brands competitive. On the left: Sales Manager Natalie Roberts hosts Howard Tennent, Regional Service Manager for Best Western, at the hotel SystemsPro booth. On the right: hotel SystemsPro Owner Lana Perkins meets with Bill Murray, President of Integral Hospitality, at the Hilton Owner’s Conference.
Consider the following question carefully; your competitive edge may depend on it:
What is one of the most overlooked and underfunded areas in
Answer: the capital budget.
Owners and general managers invest plenty of sweat equity in their annual revenue and expense budget. By comparison, the capital budget often receives little thought–until there’s a pressing need to replace an asset.
Why is this so? Because many owners hesitate to park funds in an escrow account earmarked for long-term spending.
The new capital budget planning season is underway and runs until year’s end. Now is an ideal time to create a reserve or honestly re-evaluate your current savings.
3 Reasons to Sock Away Savings in Your Capital Budget
1. Tech-savvy travelers know whether or not you’re up to par.
The proliferation of online shopping tools allow potential guests to thoroughly vet your property before they make a reservation. Positive social media reviews based on your up-to-date property trump the glossy photos on your website.
2. Increased competition means more demanding franchise standards.
Newly constructed hotels are aggressive competitors. Brand franchisors often require that funds be available for renovations or to keep furniture, fixtures, and equipment up to standard. Contracts give franchisors the right to put an owner in default if these requirements are not met.
3. The traditional industry standard reserve may be obsolete for your property.
Even if you’ve dutifully set aside the general industry standard of 4% for capital reserves, you may want to consider an increase. Owners and managers often find that this escrowed percentage does not always adequately cover major initiatives or expensive renovations. Properties are then left to fund projects out of pocket to meet the shortfall.
→ A best practice is to have a 10-year capital plan for the long term.
Most operators prepare a five-year capital plan. This leaves them vulnerable to expenses that arise 6-8 years out and then again in another five years (see chart below).
hotel ServicePro can streamline your long-term planning process with automated tools and reminders to:
- Set budget guidelines.
- Track, age and forecast asset retirement.
- Create and track a properly executed preventive maintenance plan that helps extend the useful life of your assets.
- Accurately plan for expensive renovations and large expenditures.
- Receive automatic alerts at corporate and regional offices.
- Execute a seamless approval process.
Catch the hotel ServicePro team at the 2014 IHG Americas Investors & Leadership Conference in Las Vegas this week to discuss how we can help you greet 2015 with a capital budget to cover your needs and keep you competitive.
Plan well and prosper!