"How can I decide whether to stay open or not during our hotel's refurbishment? Can carrying out refurbishment while trading become a false economy if work is not carried out to schedule? "
To assess whether to refurbish while remaining open or whether to close, management should perform an economic evaluation of the lost profit under each of the two options.
Profit is lost as individual rooms or blocks of rooms are unavailable for a few days or weeks at a time. Profit lost will be the marginal profit made on each room and, thus, a high percentage of the achieved room rate.
If the works being undertaken force rooms to close in high season or on days of high demand, the lost room rate will be high. If the refurbishment involves a lot of scaffolding, dust or noise, the actual or perceived disruption to regular guests will be considerable and, therefore, some assessment of lost goodwill also needs to be taken into account.
Refurbishment carried out while operating will almost certainly take longer than a programme involving closure, so the period of profit loss, therefore, will be greater. There will also be longer to wait before the profit upside from the refurbishment can be earned.
Equally, there is likely to be a need for a higher quality - and, therefore, cost - of project management in the accelerated refurbishment option.
In either case, failure by the contractor to perform should give rise to the right for the hotel owner to withhold a penalty that is at least equal to the lost profit.
In the case of a soft refurbishment, it is usual to continue to trade. If the refurbishment involves significant work to plant and equipment and/or involves a major soft refurbishment, then it is probably better to close.
Ian Graham
Hotel Solutions Partnership
www.hotelsolutionspartnership.com