How to calculate your hotel renovation budget

How to calculate your hotel renovation budget

Hotel renovations can be a lengthy and costly process. However, they are necessary to stay competitive in the hospitality industry. The first step in renovation planning is assessing the financial situation of your hotel. You will need to calculate how much money you have available for renovations as well as any potential expenses that may arise during the construction process such as unforeseen costs or temporary service provisions.

The next step is deciding what needs to be renovated based on your budget and goals for the property's future success. You will also need to decide if you want to renovate your hotel all at once or in phases as this will impact the budget and timeline of the project. Once this has been determined it is time to research contractors who specialise in delivering projects within the hotel sector.

In this article we go through these steps in more detail and what key things to consider when calculating your hotel renovation budget.

Step One:  Consider the type of renovations you want to do first

Before you begin your hotel renovation project, you need to determine how extensive your remodel will be.  Work out when the last time you undertook any refurbishments and assess the condition of your property.

As a general rule, minor renovations on 'soft goods' such as hotel flooring, bedding, drapes, etc, should be done every 6 years.  Major remodelling which can include replacement of fixtures and fittings as well as refurbishments of common areas need to be done every 12 to 15 years.  And complete restorations should be undertake after 25 to 50 years.

These guidelines can help determine the type of remodelling you need to undertake.  It is best to not rely on the condition of your hotel furniture, fixtures or fittings to be the only deciding factor on what you need to refurbish.  If you only do renovations once your hotel looks run-down, you have probably waited too long, so try to work to these guidelines.

Areas where investment is typically directed to in hotel refurbishments are as follows:

Guest Rooms -  This can include the creation of new rooms, adjusting room sizes, improving bathrooms, increasing individuality and upgrading entertainment facilities or technology.
Front of House Areas - Upgrades to dining areas, bars, restaurants and reception areas. 
Conference Facilities - Improving facilities to host meetings or events which can include configurable rooms and installation of audio-visual equipment.
Back of House Areas - Improving layout, staff facilities and circulation to enhance working conditions and staff productivity.
Improved on floor circulation - This can include changing corridor layouts, improving access and upgrading lifts.

Step Two: Estimate the costs of your hotel renovation

Your remodelling costs will vary depending upon what market tier your hotel falls into.  Market tiers are primarily determined by the size of your establishment and the services provided.  The most common classifications are:

•    Economy
•    Midscale
•    Upscale
•    Upper Upscale
•    Luxury

The higher the tier, the more expensive your hotel renovation cost per room will be.  The location of your hotel will also influence the cost per sqm.  For example, a hotel in London City Centre will be more expensive to refurbish than one located in the East Midlands.

What to include within your estimate? 

Depending on the size and scope of works, you may also need to consider the cost of professional fees such as interior designers, building surveyors and Architects as well contingency costs, operating supplies, etc.

If you are unsure how to estimate the costs of your refurbishment work, speak to a contractor that specialises in hotel renovations.  Contractors such as ourselves can provide rough guidelines of cost per sqm based on your project objectives.

Step Three: Plan for the unexpected

Once you have established roughly how much your hotel renovation is going to cost, try to budget an extra 20 - 30% for contingency.  This will ensure you have more than enough to cover any unforeseen costs.

There are many potential problems and risk factors to refurbishing a hotel; the most common include:

Building Condition - It is important to carry out condition surveys and measured surveys before works being.  This information will assist in the early allocation of budget for repairs and alteration works.
Working in Occupied Building - Most hotels will continue to operate whilst works are ongoing.  Ideally refurbishments are undertaken in phases to minimise disruption however this can increase costs.  This is because extra planning and work is required to either isolate refurbishments, provide temporary service stations, or resupply building services.
Floor plans and layout - It might not be possible to create the same size and shaped room which can cost more to fit out.  Irregular rooms can be more expensive because standard design for furniture, fitting and equipment need to be adapted to fit the space.

Step Four: Set your budget

Depending on the scope of your project, you should consider preconstruction services to help you avoid pitfalls in the planning process.  Creating a thorough and accurate budget can be challenging, so it is wise to hire an experienced project manager to help with calculations; they should also be able to oversee the entire renovation project should you go ahead with the works.

Our project managers are well rehearsed in carrying out hotel refurbishment schemes from small cosmetic improvements to complex fit outs. As specialists in hotel refurbishments, our team are comfortable in delivering high-value, fast turnaround projects in live environments.
Click here and read more about our teams experience in managing hotel refurbishments.

Let's chat

Remember, hotel remodelling is a long-term investment in your hotel property and brand, so you need to ensure that the quality of work undertaken is of a high standard.  If possible, try to use contractors who have experience in hotel renovation projects.

If you are considering a hotel refurbishment but not sure where to begin, give us call on 0117 967 5923 or email Alternatively, click here and check out our most recent projects.