‘Lobby Wars’ Continue to Escalate

The lodging industry will see a record year of capital investment in 2008, according to the latest forecast from PricewaterhouseCoopers.The industry will spend approximately $5.85 billion on capital expenditures in this year, a 6.4 increase over 2007, PricewaterhouseCoopers said. This record level of investment follows a recent trend, as the lodging industry set records in both 2006 and 2007 for capital spending.Setting a record for capital expenditures may seen counterintuitive, as the industry is likely to see weaker RevPar figures this year, as the economy softens. But the new expenditures are a result of some heady years in the hotel industry..These expenditures were budgeted for last year, a positive one for the hotel industry, according to Bjorn Hanson, partner in the hospitality and leisure practice of PricewaterhouseCoopers. Also, many management contracts at hotels mandate that a certain percentage of room revenue be used for capital expenditures. So, four or five percent of room revenues at a large, full-service hotel can be significant, Hanson said. Also, he pointed out that even though capital expenditures may not be mandated by a management contract, hotels that don’t have these mandates still have to spend to keep up with their competition.Spending this year will be on a variety of items, according to the forecast, including:Creation and further refinement of separate space in hotel rooms, including areas for work, sleep and relaxationFurther in-room technology enhancements, including MP3 compatible sound systemsContinued installation of enhanced bedding, flat screen televisions, high speed wireless internet, self check-in and check-out kiosks and computers and printers in business centersUpgrades of traditional desks to ergonomic work stationsContinued upgrades of complimentary breakfasts and evening receptions, to include hot food and to diversify menu offeringsDesign enhancements to appeal to Gen Xers and Millennials, including branded equipment, amenities and products, and hot spots for Internet connections. A focal point of many of these capital expenditures is the lobby. GenXers and Millennials tend to be social, and the lobby is seen as the place to gather. So, coffee service and flat-screen TVs are becoming more common in lobbies, Hanson said. “The question being asked is ‘How does my lobby compare to your lobby?” he said.