Hotel renovation reimagined - using metrics to deliver real value with Paul Boldy

What if you could establish a clear path to hotel renovation success by simply understanding the dynamics of the budget and what drives the return on investment? 

Hotel renovations are often treated as a cosmetic exercise, where the drivers are a new coat of paint, upgraded bathrooms, or refreshed lobbies. Whilst these touches improve first impressions, they rarely address the deeper drivers of asset performance, guest satisfaction, or operational efficiency. Then there are the budget discussions, most likely taken in isolation and without understanding the metrics for success.

In today’s competitive environment, refurbishment must go beyond aesthetics. It should be a strategic re-engineering of hotel performance, grounded in operational data, financial outcomes, and market positioning. 

Successful hotel renovation projects begin with communication and a measured approach to establishing a scope of works that will deliver the guest experience and improved operating efficiencies, and a budget that will deliver the desired return on investment (ROI).

The various stakeholders to a renovation project often end up working from different assumptions, leading to misalignment, cost overruns, missed opportunities, and above all delay. The cost of delay is the biggest unaccounted-for cost in any project. 

A question always worthy of consideration is ​“would you approach hotel renovation differently if you could quantify opportunity cost, and the cost of delay?”

Our metric-driven renovation methodology offers a solution. We move beyond the compromises of budget constraints, and the resultant value engineering exercise, by using operational and financial metrics to establish budgets that align with design excellence, which accelerate speed to market and unlock sustained asset value.

Traditional methods of hotel renovation are fragmented. Owners focus on asset value and return on investment, operators concentrate on brand standards and efficiency, designers look to deliver the ​‘wow factor’, project teams fight to control costs and manage phasing, and an often-overlooked stakeholder at the project briefing, guests demand smarter, more sustainable, and more immersive experiences.

The real challenge is not simply how to refresh the look of a hotel, but how to reshape its performance, and rarely do the stakeholders perspectives come together.

The results are predictable: 

• Budgets are set without reference to operational realities 

• Valuable time is wasted in iterative cost-cutting exercises

• Design quality and guest experience are compromised

Traditionally, hotel renovations have been guided by a Property Improvement Plan, often referred to as a PIP. The main aim being to audit the physical condition of the asset, highlight brand and safety compliance gaps, and prescribe upgrades to furniture, finishes, fixtures, and systems. While the PIP process ensures the asset meets brand standards and regulatory requirements, it does not necessarily address whether the proposed improvements align with financial performance metrics.

It is also important to understand the hotels position in the asset cycle. This will often determine the reasons for a decline in the average daily rate (ADR), or occupancy, and as is common, an increase in capex spend. Understanding the asset will inform the strategy for the scope and drivers for the asset.

Guest sentiment is also another good indicator of undelaying issues, be it water pressure, or lack of cooling, guest feedback is a vital component in the evaluation. Refurbishment today is about connecting design with data, and the most powerful source of that data is already sitting in plain sight, the hotel’s profit & loss account.

Any successful renovation strategy must therefore begin with the hotel’s own P&L account. Every line of the P&L tells a story about operational efficiency, or lack thereof. These metrics reveal whether the property is generating the returns it should, or whether outdated systems, layouts, or service models are constraining performance, or where revenue leakage occurs through facilities that restrict spending.

We can use this initial appraisal as a refurbishment compass to guide a road map for maximising revenue generating space, increasing operational efficiency and to define sustainable levels of investment. The repositioning of the asset is then, not only visually refreshed, but also operationally efficient, financially optimised, and future ready for tomorrow’s guest.

The fundamental aspect to this approach is how the refurbishment impacts the potential income to define the metrics aligned to budget and ROI.

By combining P&L insights with the PIP framework, a more holistic methodology emerges, one that ties design improvements directly to operational realities and future revenue potential.

In practice, this means that tired guestrooms are not just renovated because they look dated, but because guest sentiment shows it depresses ADR, or a kitchen redesign is justified because it improves F&B revenue capture and staffing productivity. It also means that the strategy can be focused on the areas with the biggest impact for future revenue generation, be it front of house, back of house, or plant and equipment to comply with sustainability goals.

This integrated approach ensures that every unit of renovation spend is supported by measurable performance uplift, aligning operational efficiency, brand compliance, and asset value creation into a single, metrics-driven strategy.

The methodology and innovation in our bespoke Renovation Budget Analysis model integrates the three drivers of refurbishment into a single calculation engine: 

• Operational metrics such as occupancy, ADR, and revenue mix. 

• Investment metrics including ROI targets, hurdle rates, and payback periods. 

• Phasing that model closures, recovery periods, and ensures revenue protection.

When we develop a Renovation Strategy we employ a detailed analysis of the guestrooms, food and beverage outlets, recreation and meeting and function spaces, to model the renovated asset, that concludes with a USALI (Uniform System of Accounts for the Lodging Industry) compliant pro-forma. This allows for the potential, or forecast position, to define the full metrics for success, from ADR to occupancy, to the number of covers and cover charge in the restaurants.

We can also make micro-adjustments to the P&L to take account of operational efficiencies, affiliation, or contribution analysis, which will provide insight as to whether impact can be made with a shift in brand, system, or marketing position. The output is a comprehensive view of the forecast verses the current position, including the increase in asset value, the opportunity cost of inaction, the cost of delay, and primarily, alignment with the investment metrics, ROI, NPV and IRR.

Consider a 225 key urban hotel with a relatively strong performance in its competitive set, but where it is losing market share, and guest sentiment points to an outdated concept and poor service levels. When assets appear to be ​‘holding their own’, the renovation justification becomes more challenging due to reduced potential for increased revenues from a simple cosmetic exercise.

This is where a more detailed analysis is the key to unlocking the properties full potential.

In the above example, the refurbishment strategy provided for a refurbished room product, with a revised configuration to account for a change in market demographics. The strategy also considered a revised concept to a speciality dining space, which was not contributing a fair revenue, and as a result had proportionally higher staffing costs. This was converted into a co-working hub and lifestyle dining concept. The strategy also reviewed other under-performing space to introduce additional revenue potential through concept and service level changes.

The additional revenues were forecast for the revised concept, and a budget defined, which was aligned to a delivery scope. The project displayed a good return, even considering for sensitivity analysis on the increased ADR and occupancy levels.

The lack of external footfall had a direct impact on the property prior to the renovation, and so with greater community engagement, through the new multi-use spaces, and the realigned product offering, the property is able to achieve greater revenue potential.

The other benefits are an increased reputation and contribution for direct to brand engagement, ultimately improving the bottom-line NOI. Operational efficiencies were improved through the re-design of back of house support areas, and additional service charge revenue ensured that staff moral improved, leading to improved guest satisfaction.

The clear budget, scope and renovation strategy ensured that the project came in under budget, with minimal impact to the operating hotel.

Not every property requires the same level of intervention. Some need only a refresh to meet guest expectations. Others demand refurbishment or renovation to address outdated systems or inefficient layouts. In some cases, re-branding or repositioning is the best route to align with evolving market demand.

Hotel repositioning is more commonly used when a hotel remains a hotel but changes its market positioning, moving from say a midscale flag to a luxury or lifestyle brand, to capitalise on changing demand or market segmentation, such as repositioning from corporate-oriented to leisure or wellness-focused segmentation.

This often involves major capex investment, design reconfiguration, and operational model changes, and forward planning of the revenues through P&L analysis and budget definition will shape the viability of the changes.

Hotel rebranding is a term that focuses on the switch of operating brand or flag. This is usually accompanied by a PIP to align the asset with new brand standards, and again, budget definition for an improved position is paramount. It does not necessarily imply a change in target market segment, but it often coincides with one.

Increasingly we are also witnessing the adaptive re-use of existing space to hospitality assets, converting redundant offices, or retail space to deliver a new lease of life that has potential to deliver the highest and best use of the real estate asset.

Converting retail or commercial space into a hotel can be an attractive strategy for developers and investors, particularly as shopping centres, office buildings, and department stores face obsolescence.

Adaptive re-use comes with a unique set of challenges such as structural and spatial limitations, infrastructure and services upgrades, sustainability, zoning, and regulatory compliance, which need to be understood and addressed early in the feasibility and design process. Again, an appreciation of the potential revenues aligned to the potential costs of conversion are fundamental to successfully defining scope and the metrics for success.

Retail and commercial office assets are often located in CBDs or secondary urban zones and so the demand profile for hotels (leisure vs. corporate vs. lifestyle) must align with the site’s catchment. 

Adaptive re-use also requires some concept flexibility due to space planning restrictions, which means they are often better suited for lifestyle or boutique positioning, where quirks of layout can be turned into a design feature, that may otherwise be a struggle with standardized midscale or luxury flags that demand strict efficiency.

Adaptive re-use can unlock enormous value, breathing new life into underperforming commercial assets and meeting hospitality demand in supply-constrained markets. But success depends on early feasibility analysis that integrates P&L performance modelling, (what revenues the adapted space can sustain), capex forecasting with contingencies for unknowns, and operational planning to ensure BOH, circulation, and brand standards can be met.

This may ultimately mean that there is a highest and best use decision around whether to refurbish or re-build, where full feasibility planning is key.

Hotel renovation is no longer a discretionary exercise in cosmetic improvement. It is a strategic accelerator for performance, guest satisfaction, and asset value.

By grounding refurbishment in operational metrics, financial outcomes, and market positioning, owners and operators can unlock sustainable value creation.

A strategy built around a budgeting model ensures faster decision-making, eliminates time delays in value engineering, and enables design teams to focus on performance outcomes. In doing so, it transforms renovation from a compromise-driven exercise into a data-informed strategy for resilience and growth that acknowledges guest insights, while anticipating future trends in wellness, sustainability, and hybrid use of space.

By asking the right questions, ​“Does this asset need new décor, new systems, a new brand, or an entirely new use?”, owners and operators can ensure refurbishment delivers measurable ROI, operational efficiency, and market relevance for years to come. 

In an era where capital efficiency and time-to-market are critical, this isn’t just a budgeting exercise, it’s a strategic accelerator for hotel repositioning and value creation.

If you would like to explore any of the points raised in this paper, or discuss our experience in hospitality, or if you simply want to get in touch, please feel free to contact Paul at: paul.​boldy@​benoy.​com.

Paul Boldy, Head of Hospitality Futures

paul.​boldy@​benoy.​com

Paul leads the strategic direction of Benoy’s global hospitality offering, driving innovation in design aligned to guest experience, technology integration, sustainability, and community driven environments. Paul has 20-years’ experience across the hospitality sector, working extensively in the Middle East and Africa, representing operators, owners and developers with feasibility studies, technical and design services, renovation, and improvement plans and operational consulting services for various hospitality and leisure assets. 

A thought leader in the field, Paul is committed to positioning the companies at the forefront of hospitality design, delivering projects that redefine luxury, functionality, and experiential design across mixed-use developments, branded residences, and hotels.