Tips for PIPs: How Hotel Owners Can Negotiate the Best Deal on Required Property Improvement Plans
November 14, 2018 12:54pm
PLAINFIELD, IL, NOVEMBER 14, 2018 -- Following a decade of record growth, hotel franchisors are putting new focus on ensuring their brands’ flags are in tip-top condition. Tired, neglected properties with lower quality index scores are being issued property improvement plans (PIPS) by franchisors to upgrade. Failing to comply with even the smallest PIP detail can result in serious penalties. Hotel owners who do not finish renovations by the date specified in the PIP agreement are in jeopardy of having their flag pulled.
PIPS are an expensive proposition. Not unsurprisingly, few hotel owners welcome them. But because PIPs are part and parcel of hotel ownership, the challenge is how to make an older hotel thoroughly contemporary and brand compliant, while keeping its PIP cost reasonable.
Before signing off on a PIP agreement, hotel franchisees should pay close attention to certain details to help maximize their ROI by avoiding potentially costly mistakes. Although situations differ from brand to brand, PIP terms are typically negotiable. Brands are especially receptive to negotiating PIPs with hotel owners who have existing relationships with the brand and own or manage other franchised properties.
TIPS TO IMPROVE YOUR PIP
If owners are careful about expenditures, they can save as much money as possible during a PIP. Following these steps will help ensure you’re getting maximum PIP value.
Finally, once you have settled on the entire scope and details with your franchisor, be sure to select a team of contracting professionals who specialize in hospitality work. Choosing the wrong contractor can negate all the benefits made in steps one through six.
Major franchisors are asking hotel owners for more capital to be spent on PIPs while the industry benefits from this profitable period in the economic cycle. Like most elements of a business transaction, PIPs are negotiable in both their scope and timeframe. It is recommended that hotel owners negotiate as much as they can up-front before signing off on their PIP agreement, or before sharing the PIP with potential investors. Keep in mind that it is the end-goal of the franchisor to not only make the best deal, but to maintain the highest brand standards and the best appearance for your hotel. The key is to find a balanced cost solution that meets brand requirements and the hotel owner's budget.
cicero's development corporation,
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Cicero's Development Corporation is an established General Contractor specializing in commercial renovation for more than 45 years. Headquartered in Plainfield, Ill., the company's best value practices and deliverables include: Renovationomix®, the systematic method of renovating to increase revenue; $ensible Green®, increasing property owner income through low-cost environmentally-friendly renovations; Disruption Avoidance Management to minimize any renovation disruption and maximize cash flow; and a Surprise Management Program to identify and anticipate potential challenges and roadblocks, and develop contingencies to ensure adherence to timeline and budget. The Cicero's team brings decades of commercial renovation experience, and is comprised of in-house architect and design teams, experienced project superintendents and foremen, and highly skilled craftsmen. Cicero's superior workmanship, attention to detail and project management leadership fuels the company's complete on-time and on budget project track record.
Contact: Zara Johnson
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