Time is money, especially when it comes to renovation planning. While it's clear a renovation or brand conversion is intended as an improvement on your investment, managing the long list of decisions will make for a shortfall in revenue without the right plan in place. Here are five key issues that can eat up both time and money when planning your next renovation, from start to finish.

1. Spending or Investing–Tomato, Tomahto. All the credit crunch talk and economic crisis reports are simply unwarranted deterrents to seeking funds for a hotel renovation in the first place. On the contrary, liquidity and capital preservation are as essential now to hotel owners as effectively managing operating efficiencies.

Assuming your hotel asset generates excess cash flows and isn’t highly leveraged, your current lender may be willing to extend additional credit to protect its collateral. We are still in relatively low interest rate territory and depending on your current rate, now may be the optimum time to refinance your existing mortgage and include your renovation cost.

Even in this environment there are financing strategies and funding alternatives still available. One solution is financing your project through a specialty equipment-financing lender that would be interested in a “money purchase” security interest in only the underlying renovation assets and your property’s overall cash flows. 

Renovation projects may be financed up to 100 percent of the  equipment package or up to 80 percent of the overall project and based on financing terms up to seven years. With this you preserve liquid capital on hand to support other short-term operating needs.

A tax-oriented lease structure may be of value if you have a significant amount of net operating loss carry-forwards. Here you will forfeit the unneeded depreciation tax benefits that would result from capitalizing the assets on your balance sheet—let the leasing company own depreciation tax benefits in exchange for a lower interest rate (cost of borrowing).

2. Gather the Usual Suspects. There is interdependence between three distinct resources to pull off the perfect project: the designer, the general contractor and the purchasing agent or dealer

If these resources aren't aligned, it can be the largest, most undetectable waste of time and money.  Securing all of them at once, from within the hospitality industry, is  ideal.

Getting the contractor involved with design can create value engineering that can save money.  Bringing the contractor on board after the design is complete often results in a never-ending list of change orders. In addition, the purchaser can offer you the benefit of volume pricing and also help coordinate shipping lead-times.

3. Plaid and Paisley: No Longer the Classic Design Pitfall. As you assemble your team, the designer can be of unique strategic value beyond just knowing current trends. Unless your hotel is in the boutique segment, your best bet is to seek a designer who has a familiarity with a diverse number of  brands and segments. 

As an owner, resist the temptation to inject your own personal taste into the approval process. And please resist the assumption the interior designer finishing up your home kitchen remodel can do your hotel next.

4. PIP: The In-Laws of a Budget. A property improvement plan is a requirement to the planning process, like in-laws are to holidays. It comes from the franchise and is where project scope details are both driven and/or granted. Budgeting is a waste of time without it.

The detail items and associated cost for each category within the PIP will be significant to the potential lender. Lenders underwriting will be more favorable toward a higher advance rate for the hard assets such as furniture and fixtures and a smaller advance rate to soft cost such as installation and consultant fees.

Certainly, the combination of how well capitalized your company’s balance sheet and the historical financial strength of its profit & loss performance will also be determining factors.

5. Lead Times, Logistics and Letting it Roll. So the proverbial handshake with your lender is done and your design, construction and purchasing teams are getting along like old frat chums. Now what?

Place the orders and let it roll.  Renovations are messy, but lining up industry experts will make a difference.

A contractor familiar with the hotel environment is sensitive to the precision of taking rooms out of service and aiming for the scheduled return.  The contractor will manage the lead times and logistics in step with your occupancy demands. Hotel-friendly contractors are also prepared to manage crews in a facility that is open to the public, which may alleviate—not entirely eliminate—guest satisfaction concerns.

Allison Sansone manages marketing and business development for Apollo Hospitality Group, a turnkey hotel renovation company based in Southern California. She can be reached at 714-494-2324 or allisonsansone@apollohg.com. Reginald Heard is president & CEO of Bankers One Capital, an advisory and intermediary financing firm that specializes in debt placement and private equity services to the hospitality, general franchise and restaurant industries. He can be reached at 203-791-9998 or rheard@bankers1capital.com.