Effective Hotel CAPEX Planning in Today’s Economy

Jul 6, 2022

Web Team

Web Team

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Capital expenditure (CAPEX) planning has always presented unique challenges for hoteliers, but in dealing with the “virus that shall not be named” over the past two years, those challenges have been magnified. To remain solvent in the face of dwindling reserve accounts, many hoteliers were forced to defer CAPEX spending and delay maintenance of buildings and machinery. The thought was, “Hey, if the chillers are working, why spend money on them now?”

But as travel-deprived guests begin flowing back through your doors, and this temporary hiatus on capital spending ends, you’re confronted with a new set of challenges…and opportunities.

You likely have a lot of assets to replace or renovate due to delayed projects. In fact, U.S. lodging CAPEX spending is forecast to increase by about 70 percent this year, after unprecedented pandemic-era lows. You’re also facing supply chain delays, inflation and an inability to source products.

Instead of falling into a fire-fighting mode, or “doing things the way they’ve always been done,” take this opportunity reevaluate your CAPEX approach. Transcendent can help you put the right tools in place, empowering effective management of your CAPEX spending, regardless of how the economy is performing.

 

Stop Delaying and Start Planning

If you continue to delay addressing your CAPEX needs, it will cost you more over the long term. For instance, holding off on roof replacement could lead to leaks and significant water damage. You’ll find yourself in a “reactive maintenance” cycle, paying for expensive emergency work and taking a hit on your bottom line due to downtime and potential damage to your reputation from negative guest reviews.

Every $1 saved in deferred maintenance results in $4 of additional CAPEX later and can shorten asset lifecycles by as much as one third.

Transcendent delivers a tightly integrated preventative maintenance (PM) and CAPEX planning system, letting you proactively control your costs moving forward. Digital tools enable you to use relevant data rather than subjective guesswork to perform a thorough evaluation of each asset, helping you establish a priority system and budget for necessary repairs and upgrades. From there, you can develop a funding strategy to cover short- and long-term CAPEX allocations, ensuring that major projects aren’t overlooked and you’ll have few surprises down the road.

 

Efficiently Track Your CAPEX

A key factor in keeping CAPEX costs low and maintaining a proactive capital planning strategy is ensuring that your building and equipment are running optimally at all times. Consider that with PM, a centrifugal pump will last for 20 to 30 years, but that same pump could fail in five years without proper maintenance.

Transcendent lets you efficiently track your assets with real-time monitoring and the ability to instantly view key data, including date-in-service, maintenance history, replacement interval, estimated cost and other relevant details. You can quickly determine if a piece of equipment is operating up to standards, and easily compare repair versus replacement costs.

Transcendent’s tools also help you keep your energy costs in check by making certain that building systems are operating at optimal energy efficiency. A crucial point since skipping even one annual boiler cleaning can reduce its operating efficiency by two to three percent. All bids and documentation are digitally linked to each asset, ensuring that you take full advantage of any rebates, incentives or grants when implementing a new piece of energy-efficient equipment.

 

Leverage Your Purchasing Power

Traditionally, additional funding for repairs and renovations could be obtained through refinancing. But this is not a viable option for many hotels in today’s economy. Necessary funding now often comes from out of pocket, making it more important than ever to leverage your purchasing power for property- and portfolio-level investments.

Transcendent gives you greater fiscal control over CAPEX executions. A single dashboard presents a complete list of repairs and their projected costs in a standardized format from each property. You can easily compare bids and attain volume discounts by bundling CAPEX proposals from multiple properties. You can also view the service histories of different vendors and manufacturers to inform your decision-making on upcoming CAPEX needs.

Even before the pandemic, underappreciation for lead times was a common error among hotel operators’ CAPEX plans. Transcendent helps hotel owners and operators be more proactive in dealing with today’s supply chain issues by allowing you to plan for longer lead times and prepare for purchases well in advance. The Transcendent CAPEX system can even be configured to apply exchange rates for international sites as well as inflation rates, particularly relevant in today’s market.

 

CAPEX is Key

Strategic CAPEX planning helps differentiate your properties and drive value in this competitive marketplace. Transcendent’s solution helps ensure that you get the highest and best use out of each CAPEX dollar by using rich data to support better investment decisions, and giving you greater fiscal control in any economy.

Do you need help managing CAPEX to get the best value in this challenging market?

Web Team

Transcendent Web Team

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