Solutions by Industry

Hotel Remodels: A Case Study

An international hotel franchisor and operator sought to enhance the aging properties of a core brand through a large-scale reinvention.

  • The company used APT's scientific approach to optimize an extensive refurbishment program.
  • APT's scientific approach minimized measurement error, detected a clear lift in RevPAR, and generated organization-wide consensus that the renovations delivered an attractive ROI.
  • Continued implementation of the remodels is on track to create approximately $100MM in net present value for hotel owners.
The Company:

An international hotel franchisor with thousands of hotels

The Challenge:

Management believed that a core brand underperformed, in part because of its outdated brand offerings.  The hotel chain designed a hotel refurbishment program and began investing hundreds of thousands of dollars per hotel to update lobbies, guest rooms, and exterior signage. The brand’s management carefully tracked the performance of the initial set of “pilot” hotels but was unable to detect a clear impact on key performance metrics. Measured changes in RevPAR, occupancy, and customer satisfaction varied widely, even erratically, across the refurbished hotels. Management halted the remodel investment and reconsidered various options to address the brand’s underperformance.

The Solution:

The company used APT's Test & Learn™ solution to evaluate the precise impact of the capital investment on each hotel. Given the small number of hotels in the “pilot” program, it was critical to take an analytical approach that minimized the measurement error inherent in analyzing week-to-week changes in performance.

APT’s refined measurements clearly identified incremental RevPAR and improvement in guest satisfaction.  The confirmed increase in RevPAR made the capital investment attractive to hotel franchisees.  APT’s analysis also confirmed that the remodel activity was not cannibalizing surrounding same-brand hotels, and that the incremental business was coming from nearby competitors.

In addition, APT used guest data to identify the specific guest segments that the remodeling influenced the most.  The company targeted these segments to enhance the program’s returns.

Finally, APT identified the characteristics of hotels that were particularly well positioned to benefit from the remodel and therefore likely to generate above-average returns.  The company used this analysis to determine which hotels should be prioritized for an earlier remodel, allowing all stakeholders to capture larger profit opportunities earlier in the remodel program.

The Results:

Management was able to recruit additional franchisees to participate in the remodel program by demonstrating the attractive returns that resulted from the first round of remodels.  As additional remodeled hotels yielded the projected level of benefits, the company continued to aggressively remodel the remainder of the portfolio. Using Test & Learn for Sites™, management could also identify which components of the capital investment should be undertaken on a site-by-site basis.

The company ultimately determined that this highly tailored remodel initiative is on track to generate an incremental $100 MM of net present value for franchisees.