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Investments for renovations 2014: less for upgrading to meet code and more for the product

When it comes to renovations, for several years hoteliers have needed rise above difficulties related to the slow economy while respecting mandatory upgrades and making their product evolve. While the total of investments (aside from major operations at palaces) in most hotels is not truly taking off in 2014, at least this investment is refocusing on improving the product rather than meeting new building codes, as a survey by Hospitality ON with Olakala shows.

While the investment equation for renovations in 2013 was already difficult, in 2014 the problem is not becoming any easier to resolve. Investments for renovations made by hoteliers have the same variables involving updating equipment according to code and the difficulties inherent to financing works and the uncertainty of the economic context. In order to measure their impact, Hospitality ON, with Olakala, has carried out a survey of French hoteliers, for the second consecutive year.







In 2014, the general trend for renovation investments is still not meeting with much enthusiasm from hotels, except for major operations such as those concerning Parisian palaces. 48% of hoteliers interviewed thus estimate their investment to be below normal in 2014, whereas last year that figure was 45%, and  only 43% consider it to be higher than normal.

As far as explanations are concerned, the difficulties financing works (cited by 28% or respondents) have gained ground over the incertitude of business (20% of respondents). In 2013, only 17% encountered financing problems. While confidence in the outlook for the future may have slightly improved, undoubtedly because all the countries in Europe, except for France, have regained a positive market dynamic in 2014 (see our article), financing appears to have gotten more difficult. While only 43% of hoteliers interviewed affirm having invested more than usual in their property in 2014 (versus 47% last year), the allocation of spending changes significantly: this year hoteliers invested more in improving their product than in making changes to meet code (for example, accessibility or fire safety at properties). The share of professionals who mostly invested in regulatory improvements is still high despite a 24% to 19% drop observed between 2013 and 2014. One of the noteworthy trends in 2014 is thus that the share of elected (versus regulatory) investments has increased.

This analysis is confirmed by the amount of investments in required renovation works, which was less in 2014 although it remains important. For 65% of hoteliers interviewed, fewer than 20% of investments were to meet requirements, whereas more than half of them affirmed the contrary last year. On the other hand, this percentage is still higher than 80% for 9% of them (versus 11% last year).

Between meeting regulations and the problem financing work within a complicated economic context, the setbacks remain difficult for hoteliers to overcome.

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