Are you asking yourself whether you should budget for any capital expenditures this year? You want to keep your hotel in a position to compete in your market, but can you?

The obvious problem in today’s market is there is limited or no debt, and occupancy incomes are being hit, too. The economy is severely affecting renovation starts this year and you need to conserve cash wherever possible. You planned to have a certain amount of money to renovate, but now you have much less. You’re not alone. So, with the limited amount of money you do have, what can you do differently?

Get to know your guests again
Your homework as an owner and operator starts with the basics. Remember your market. Be a hands-on owner. Live it. Before you can determine what has to be done, you need to stay at your hotel again. Don’t just talk to the operations staff; I mean go spend a night, use the restaurant and the fitness room. Stay in a regular king or double queen room, not the presidential suite. Work in your room. Relax in the lobby for a while. See who comes in and how long people use the lobby. Feel the front desk, experience the lighting and drink the coffee.

After you live at your hotel, then go stay at your competition. See what they are doing right and wrong. Understand what services and amenities they provide. Are they giving the public a better deal? By understanding your competition and market, and why your clientele chooses your hotel and brand, you can start to look for areas where your property is not making the grade.

Now that you’ve experienced your hotel again, it’s time to bring in the expertise. You have more time now, so use it wisely before you plow ahead. Don’t stop everything. Keep moving, but move forward smarter. Take a month or so to do some critical strategic thinking. Plan ahead by looking at the end result that you want to achieve, and then define how you will get there.

Engage the appropriate design team and project management consultants and re-evaluate your physical master plan. Determine whether the renovation will be a simple refresh or a completely new scheme. Do some further due diligence. Re-evaluate your 10-year capital improvement and repairs and maintenance budgets. Take a closer look at your latest property improvement plan to see which items you really have to replace and which ones just need cleaning and fixing. Don’t renovate the wrong area of the hotel because an old capex budget told you it was time.

Why renovate now?
Is this the right time? Well, it is certainly a great time to take advantage of lower occupancies. If your occupancy is down at 50 percent this year, then perhaps it is time to tear apart the lobby and some guestrooms. You have fewer guests than last year. You are probably charging a lower rate this year. Renovating now will bother fewer people. Plus, with more rooms available for renovation, it’s the perfect time to start by renovating your top guestroom floor, with one floor below remaining vacant to limit the noise guests hear.

Then, just work your way down the floors, keeping a cushion of empty rooms above and below the work areas to limit noise and dust and keep guests happy. You may be able to do this now without losing occupancy and without shutting down the hotel.

This is also a great time to take advantage of the available talent and competitive pricing out there. Construction costs are down, material costs are lower and labor is also less expensive. Transit and gas prices are also more reasonable than they were last year. Vendors are competing for your work and may be willing to make a smaller profit to get the work. Take advantage of this before the prices and rates go up again.

Stay Competitive and Increase Income
It still takes money to make money. At one property my firm worked on recently, the owner decided to close a top-floor restaurant that was not producing good revenue and turn it into an income-producing ballroom. The owner knew that the spectacular views from the restaurant were being under-utilized and found a way to use the advantages of the space to generate income. For other owners, finding food and beverage opportunities for the hotel could be a way to generate income. The hardest part of a new F&B venture is to make it a profit center and not a loss leader.

Look at other scenarios: Perhaps you have rooms that are less attractive than others, so you always have these guestrooms as a last sell. Consider converting four guestrooms into a meeting room and a boardroom. This creates a space that you can rent to local businesses for meetings and conferences, and it may even help the hotel sell weekday blocks of rooms.

It is a soul-searching process to look at your property from an outsider’s perspective and find the hidden income potential. Remember to use your in-house personnel and operations team for ideas, and consult your design and project management team for additional help.

Lower Expenses
You want to cut costs, but you should not give up guest amenities. Guests will always notice a reduction of services. So, don’t eliminate amenities they like. Spend capex money on lowering operating expenses and on preventative maintenance. Keep in mind the long-term benefit and the quality of the items you are replacing. Determine which items are in your R&M budget and which items are truly capex. Whether costs are R&M or capex will have accounting, depreciation and tax consequences that will also influence your decision-making.

Conserve Cash
If you have to spend money for fix-up and replacement in your public areas or your guestrooms, then spend less money to get the same effect. In general, ask yourself if a piece is worn and tired. Does it need a clean up? Is it the right piece? In public spaces, try cleaning or simple painting before you embark on a major project. In guestrooms, try changing softgoods instead of replacing casegoods. Fix and repair items before you replace them, as long as they still look good and will last long enough to warrant the repair.

Repairs and Maintenance
When you’re planning to spend money on improvements, it’s important to prioritize items that keep the hotel in working order. First, check water and energy bills to see if there is some unexplainable change in electrical, gas or water usage. Target it. You might need to spend money for a mechanical engineer and/or mechanical contractor to test, re-balance and check all of your public space and guestroom mechanical systems. An engineer’s thorough review of the mechanical, plumbing and electrical systems, called commissioning, may lead to finding and solving a previously-unknown problem that will save you a lot of money in the future. A faulty damper, valve or wiring to a mechanical unit or control system might be the cause of a unit running all the time, thus spending more energy and consequently reducing the life of the unit.

A good preventative maintenance program that checks all systems, from elevators to dishwashers and laundry, is something that should not be compromised during this time.

Be Green, Save Green
We hear a lot about sustainability, or “green” design. One tenet of green design is to spend on items that lower the energy usage in your building. This is not about overspending on new trendy green products that are chic, just for marketing purposes. Does the product or technology lower operating expenses or energy use? What is the payback time? Will it increase occupancy? Will it increase ADR? Will it last?

In short, despite the tough economic times, if you have capital to spend, spend it now while the opportunity is here. In a down market it is OK to spend some money, as long as you are wise about it. In the end you’ll be spending money where it makes money and saves money.

Scott P. Rosenberg, AIA, LEED®AP is an architect with 22 years of experience in architecture and real estate development-related fields. Rosenberg is vice president at Jonathan Nehmer + Associates, Inc., a leading architecture, interior design, and project management firm serving the hospitality industry for 20 years, with offices in Washington, D.C., Boston, MA, and San Diego, CA. For more information, check out http://www.nehmer.com/.