Avendra International’s Chip McIntyre, VP of Strategy and Development spoke on the panel ‘Strategic Capex: Rethinking Procurement as a Powerful Tool for Asset Management Success’ at the AHC 2024 in Manchester, UK. Read on to learn about Chip’s outlook on capital expenditure, as reported by Hospitality Investor.

Hotel owners and investors are adopting a gradual and phased approach to capital expenditures (capex) and property improvement plans (PIPs). This cautious stance is largely due to concerns about the economic cycle and rising borrowing costs. The increase in borrowing expenses, along with the possibility of declining revenue per available room (RevPAR) or occupancy rates, is leading to more careful spending decisions.

“We’re three years into a really good cycle. How long is it going to continue?” said McIntyre. “Because at some point, as money is more expensive, and then if RevPAR or occupancy softens, that has a dramatic effect on where you’re spending the money.”

The profile of hotel guests influences capital expenditures as well. There has been a noticeable trend of increased capex in the luxury segment, while the select and midscale segments see less investment.

“I think owners look at the higher-end assets, which are continuing to drive RevPAR, and say, I’m going to get my money back on this so I’m going to spend on this lobby or spa upgrade. In select service, we’re getting more to that point in the cycle where things might turn, and so spending has slowed,” said McIntyre.

Extending the lifecycle of furniture, fixtures, and equipment (FF&E) is one strategy to manage capex efficiently.

McIntyre suggested that for hotel case goods (chests, dressers, bookshelves, desks, wardrobes, etc.) the cycle could be extended to 15 years.

Explore Hospitality Investor’s article for a full recap of the panel.