Question

1. What are the criteria used to select the renovation projects?

2. What would be the indicators that a hotel need to be renovated ? Please make reference to the stages of the hotel life cycle in the explanation.

Answer 1

1. Following factors need to be kept in mind before deciding on the renovation of a project.

(a) Availability of space and market - The renovation involving capacity augmentation to meet the increasing demand needs space. The renovation cost must be justified by the availability of an existing and growing market and sales potential, which may pay for it in short time.

(b) Cost benefit analysis - The cost incurred in the renovation should be justified through the repayment potential. However if the market is growing at a rapid pace, the organisation may choose renting or leasing of a new place to meet the demand.

(c) Urgency and duration of need - The short term needs can be fulfilled by renting or leasing the premises. Similarly more urgent needs can be addressed by a rented or leased property instead of renovating the esxisting one

(d) Availability of funds - The renovation needs money upfront. The need and urgency can be weighed against the funds available,

(e) Regulations- Some regulations need periodic upkeep and renovation of properties, which need to be looked into.

(f) Stability of business and analysis of timeframe - A renovation should address at least few coming years' needs. For a highly volatile scenario involving high uncertainty, leasing or renting is more preferable

2. The indicators that hotel needs a renovation are given below

(a) The lifecycle of the utilities, furniture and other accessories is reaching to decline.

(b) The property visibly looks worn out and needs rework.

(c) The existing resources are burdened heavily under demand pressure.

(d) Hotel is losing opportunities due to lack of space.

(e) There is sudden increase in bad customer reviews about quality of facilities.

(f) Competitive activity that is driving your customer away.

(g) Market changes that are set to offer huge business opportunities.