Written by: Alan Benjamin, President

Just 10 days ago, I had the pleasure of moderating the 8th annual HD/ISHP Town Hall/Owners’ Roundtable at the HD Exposition & Conference 2010 in Las Vegas, NV. Being able to moderate this panel for 8 years in a row, and talk one on one with hundreds of different industry leaders, has provided me with a great perspective on the state of the CapEx and FF&E spending we are currently experiencing in the hospitality industry. This year alone, I was able to work with 25 senior executives representing a great cross section of owners, management firms, asset managers, private equity funds and leading global brands. As I walked around the room during the Owner’s Roundtable session, the number one topic being asked of all the hosts was: “When and How Big?” That is, When will CapEx spending return, and How Big will the return of spending on hotel assets be? As an industry, will we be back to the record 2006/07 levels, or will our industry re-set at a “new normal” of some smaller percentage of the last peak of the cycle?

Generally, our FF&E industry, and CapEx spending overall, is viewed as a “trailing economic indicator”; meaning, we lag behind downturns and trail recoveries. I may have a slightly optimistic view, and of course, there are still many risk factors that can change the direction or derail the recovery train, but be prepared, no matter what area of the industry you are in, for FF&E and CapEx to be at the forefront of the recovery in this cycle.

Let’s review some facts. The fundamentals of the hotel business started to decline in early 2008, took a nose dive September 2008  and now, after 6 quarters of business, occupancy is slowly coming back, and rate will soon follow. Currently, there is a small number of new construction projects, as few developers have been able to secure construction financing for the last 18 months. This lack of construction funding will not change for a while, however  we have a huge inventory of existing rooms that have not had a penny of CapEx spent on them for almost 2 years now, even the hotels where the “CapEx cycle time” was already long overdue. In order to get a larger piece of a smaller pie, the hotels will all, to some degree, need to renovate soon to differentiate their product.

Whether it is a brand driven or owner/market driven renovation…there is simply a limit to how long a hotel can operate, regardless of lower REVPAR, before the FF&E needs attention. Be prepared…by Q2 2011, watch the FF&E renovation spending come back to a very healthy level. While I am an optimist, I am also a realist, and note I am not predicting a new record high of CapEx for some time.  But get engaged in the conversation with all the stakeholders, as the trend is there for our FF&E industry to recover very well and sooner than many think.

Let’s make it happen.