Wednesday, February 1, 2017

What would you do with an historic hotel built in the 1920s that was condemned and is now being given a new life as a boutique hotel?

Bring a large budget and a crowbar. And leave both of them locked up securely in the trunk of the car until you've checked out the neighborhood very thoroughly. 

(Of course, if in checking out the neighborhood, you think you might need to get to that crowbar in a hurry, I'd pass on that hotel. We'll get to that part.)

I love old hotels and old theatres (So much history yet to make... | You don't see this anymore... | Old theatres (Rockin' the Paradise . . .) and I've barely started on those Pinterest boards . . .  ), particularly those having some, at least local, historic significance. (The brand new Microtel on the next exit will be old in about 70 years, but not necessarily historic - 'cheap old' doesn't get it. The life expectancy of any building - like that of a person, and not entirely coincidentally - is seventy-something years. Yes, there are a lot of 80- or 100- or 200-year-old buildings out there, but in order to make that average work the way it does, there have to be an equal number that didn't make it past 40, or 50, or 60 . . .). 

But while a project like this can be rewarding in terms of more than just financial return, you want to be careful with your emotions on something this delicate and potentially tricky . . .

Here are some things you should know before you even begin.

See my epically longwinded response to What does it take to start a hotel?  Even though I'll be the first to agree that what you're doing is special, all of it still applies to you. 

You're not off the hook that there's already a hotel in your location: if it's a mistake, it's somebody else's mistake - until you make it your own. If that location wasn't a mistake in 1920, could it be a mistake now? I've heard of several historic hotel projects in Detroit (usually, with casinos attached), and given that Detroit was once a major city I'm sure that there are more old, historic hotels to be had - each, in its day, built on a spot where it was a truly great idea to build a new hotel. But you can't move them, and a once great city that's literally being bulldozed over in many places because it's lost most of its economic base and two-thirds of its population is a highly questionable place to start a new hotel.

You still want to have a pretty good idea who's going to show up as guests before you commit, and what your market tier and branding options are and which one is most appropriate for your location. (It must be something upscale: we'll talk later about your budget and you'll understand that it'll have to be in order to recover your investment.)  

Although I'd go as far as to say, when I'm in one of my grumpy moods, that most hotels will run themselves better than the people who try to run them try to run them if the hotel is given half a chance (that is, someone's controlling costs and keeping the guests, if not happy, at least sufficiently calmed down that they're not walking out the door never to return as fast as they show up for the first time); your hotel is not going to manage itself but just so well - in most cases, not good enough. 

Likewise, your hotel will market itself up to a point if it's not in a completely dismal location with a totally worthless franchise; but there are likewise very short, usually inadequate, limits on how well it can do that. (Even happy guests will often walk out the door never to return from time to time, if for no better reason than they no longer need to be in your town, and you need to find replacements for them with the same or higher frequency, at the same or higher rate.)

I don't have any good answers that transcend restrictions on what I think would make money - no hotel, no matter how great, can go on but just so long losing money. Besides, I'd rather have it last another hundred years.

If it's a historic older property, you don't get to pick the location: someone already did. And unfortunately, if it's not in a good one, you can't move the hotel to a better one. That's where checking out the neighborhood thoroughly comes in. Two problems immediately come to mind:

People love to drive - even if they fly somewhere, they almost always rent a car at the other end - and you're never going to get them to give it up, but where are they going to park? People may park and walk up to a quarter mile - if they're not carrying bags. That's a problem with both old theatres and old hotels: they tend to be downtown, or uptown in an area where there is little or no convenient parking; relics of a day when we weren't nearly so car-dependent. Sometimes, not even a parking deck will get it. (Even '70's-era malls are closing and being torn down because they're designed so that people have to walk too great a distance through a parking lot to get to an entrance . . .)  So, before you commit, make sure parking is handled. 

Part of your job as a hotelier is to create a space, an enclave, an oasis of sorts for your guests. But your guests aren't going to travel to, or even through, a bad part of town to get to it, unless that part of town is for them quite normal (in which case the question becomes, do you want such people as guests?)  Even if it's not a 'bad' part of town (as in, they don't have to worry about what's going to happen to their car if they leave it parked outside, or if they can walk around without being mugged); they still want to have things nearby: eating places, shops, things to do. An older manufacturing or warehouse district doesn't get it. Neither does an old downtown business district predominated by vacant or boarded-up storefronts - even if some of them are open before 5 or 6pm. Neither do vacant lots where once-thriving businesses once stood. Neither does the county jail (there's still an empty, downtown not-so-historic hotel occupying a city block in one place where I used to live, bordered on two sides by old storefronts with an under-50% occupancy rate,  one side by the county courthouse - and one side by the county prison.)

So, in whatever location you find a historic fixer-upper, if you wouldn't build a new hotel in that spot, and invest the money required to do that, then take a pass because in this case, the investment is going to be even greater - which brings us to . . . 

You're not going to save money on this job. That's where the large budget comes in - you're actually going to be paying for your hotel twice in a lot of cases.  Your renovation costs will almost certainly exceed your acquisition costs.

You're not going to air it out, paint everything over, and open it: that's what the last five or six people who renovated it did to renovate it, and that's what brought it to the state in which it exists now. That's where the crowbar comes in - you'll be stripping it to the stud walls. The wiring, if even still sound, will be inadequate to today's needs. Same with the plumbing: this will be the time to install a sprinkler system and make it FEMA compliant (without that, government employees can't be reimbursed for business travel expenses incurred there). And all that nice millwork must either be replaced . . . or duplicated. 

You might get lucky and not have to open up every wall. (For something like this, I'd have an architect that specializes in historic restoration - if I have to choose between one skill set or the other, I can tell him everything he needs to know about how to design a hotel, but I'll need his historic renovation expertise . . .)  

But don't count on it: budget a complete renovation. Even if you do get lucky up to a point, your luck could also swing the other way: if you open a wall and something inside it is not up to current building code, you are legally obliged to bring it up to current code (and depending upon what you found and how potentially hazardous it is, your building inspector may feel the need to demand you open other walls, looking for similar problems to fix). Or you could open a wall and discover a mold or mildew problem. Or even worse, asbestos.

Even old motels built in the sixties won't meet modern-day electrical demands on a hotel room. There aren't enough receptacles. Back then, who knew that every room would need a refrigerator and microwave if you were to hope to rent it for more than $64.99 per night (And in a historic rehab, you're not going to rent the rooms for less than, I'd say, $129 or so. You can't. Your investment will be too much.) Not even Buck Rogers could imagine wi-fi, or I-pad ports, or even cable TV. Oh, did I forget to mention cable? And phones?

Ummm . . . forget it, you need a new, up-to-date phone system. But if you find something like this, consider shining it up and putting it on display in the lobby . . .

You'll be saving very little of your furniture: period pieces that can be refurbished will be the only things worth saving - and you'll be paying a premium for matching (or at least compatible) replacements so your furniture will look uniform from room to room. You'll still need new mattresses and box springs. You'll still need new TV sets. Unlike buying a thirty-year-old Quality Inn, you cannot walk in the door and count on being able to use any of the furniture that's there - even what you have that's worth saving will need reconditioning.

Handicapped-accessible rooms that meet current code will have to be retrofitted. Fire protection systems that meet current code will have to be retrofitted.

(I recommended first-time owners going the acquisition route, but this isn't what I had in mind.)

Usually when these projects fail, it's because either 

  • someone didn't give enough consideration to the viability of the location, or
  • they didn't budget enough to do the job right.
I've seen sickening examples of old, grand hotels who were acquired by someone planning to rehab them, only to not be able to get the planned renovations done, and simply abandoned, left to further neglect and an uncertain if not sad fate. It's cruelty on the level of buying an animal from the pet shop, then abandoning it on the street when you change your mind a week later.

Americus Hotel, Allentown, Pa.; acquired 1985, actually ran as a Radisson for a few years, left to run down, abandoned, will probably have to be imploded. One man is behind Allentown's nightmare: Mark Mendelson

Hotel Prince Charles, Fayetteville, N. C., seized for back taxes after several years of a developer trying to figure out what to do with it: now the City of Fayetteville gets to try to figure out what to do with it.  Fayetteville's Prince Charles Hotel found unsafe for habitation :: | Hotel Prince Charles set for April 5 public auction

Lack of bank financing is a frequent culprit: bankers tend to ask the wrong kind of questions, and that's frequently the first point where your insufficient consideration of the hotel's location will tell on you. Oh, and by the way . . . if any of your funding, for any stage of it, is dependent upon local government grants, tax abatements, loan guarantees, 'public-private partnership', or stimulus funding, have it in the bag and make sure the check is going to clear before you sign anything.

Large successful projects that don't involve government funding tend to be done by owners with deep pockets who can wait a long time for a payout. Marcus Hotels (whose parent company also owns a theatre chain) seems to have carved out somewhat of a niche with these projects. 

Hotel Pfister, Milwaukee

Hotel Phillips, Kansas City

The biggest thing to remember is, don't go in half-a*sed: if you're in, you're in all the way. You can buy a thirty-year-old Days Inn that's due for some freshening up, and do the freshening up as you go along over the next couple of years, but that doesn't work with historic rehab. Like a new construction job, it's all or nothing: you can't rent unfinished rooms cheap and fit them up later when you can afford carpet and wallpaper. 

The common thread that runs through all the failures is that they tried to patch them up and get what revenue they could with what they had to work with, from cheap local business and SRO's, while they tried to get the rest of their project funded and in order. They never did.

Now that we've covered all the scary (but still necessary to confront and address and keep in mind) stuff, let's get to the fun, rewarding part.

My dad told me, when I became old enough to get my drivers' license and he gave me his limited-run 1960 Chevy Impala (one of only eighty produced that had a padded dashboard, an ahead-of-its-time innovation that year) that he'd bought new when I was still an infant; keep it original, don't go putting Cragars on it, or cutting up the body and trying to customize it. 

You'll generally want to maintain that purity and integrity of design with your hotel. If you have a 1920's-era Beaux Arts or Baroque design, try to furnish it in a manner compatible with that period. If it's 1930's Art Deco, you can still get Art Deco-style furniture at a good price. 

You'll have space that you'll have to find some productive - or revenue-producing - use for, and needs have changed over the years. But this use has to be consistent with an upscale hotel operation: a storefront payday-loan shop doesn't get it. A hair salon or barber shop might, as might a classy gift shop. 

More than one hotel has, in its old age, ended up with some version of a 'gentlemens' club' or gay bathhouse in its cellar or lounge area, but unless Bette Midler and Barry Manilow can still be persuaded to appear and perform there from time to time, or unless it can - very delicately - be turned into one of those neo-burlesque venues featuring the sort of performances in which Lady Gaga got her start, get rid of it.

Ansonia Hotel, New York, now an apartment building. Even without the Continental Baths - which featured the live 'bathhouse' acts in which Bette Midler and Barry Manilow each got their career start in the early '70's - and later, the 'swingers' club' Plato's Retreat - as part of its history, it would still have lots of stories to tell. Designed to be as near self-sufficient as a building in Manhattan could ever hope to be, it even had a small farm on the roof - complete with livestock. (The Ansonia on Wikipedia)

You're going to need lots of friends for this.

I'd certainly bring the Best Western brand rep aboard, early on. At a very minimum, you'll want your property to be Best Western-compliant, even if you wish to go independent. If you do go with Best Western, having the guy on board early on insures you the guidance necessary to keep it that way, or in areas where you can't, come close enough to meeting their standards that they'll allow you a variance or exception as necessary. 

If of course, you have another franchise in mind, this would apply to your brand rep for that franchise. But boutique hotels tend to be dreamed up by the more independent-minded (One of the things I like about Best Western is that it lends itself to this type of project better than any national hotel brand. Indeed, in 1996 when the Hotel Bethlehem [Pa.] went into bankruptcy and I pitched it to my employers at the time, it very nearly became a Best Western.) And - while some brands are made to order for such a thing (e.g. Ascend Collection, or Autograph Collection if you're among the Marriott-anointed) - few franchise organizations can accommodate them, at least on any terms other than their own. (Cambria Suites and TRYP by Wyndham appear to be formula 'hip'. But call the TRYP people up anyway and see what they do, along with ICH's Hotel Indigo people. NYLO would even more appropriate for what you want to do, but I think they need another twenty or so locations before I'd consider them capable of supporting a franchised operation.)

Hotel Bethlehem, Bethlehem, Pa.

Your local historical association or, if your city has one, a Historic Landmarks Commission, is a wild card. If you draw their attention, try to keep any relationship you have with them positive. Your hotel has to make money: if you have a difficult relationship, it'll be because they don't get that, or just don't care. They can be a pain about wanting everything done just their way - on your nickel - with you merely reduced to the 'father of the bride' role: you just write checks. On the other hand, if they can be worked with at all and you manage the relationship well, they can help you with a great deal of advance opening publicity and a nucleus of corporate and group support from among their own supporters.

Make friends with someone who knows how to run a restaurant, if you haven't already. You're going to need each other. Chances are, a hotel that old is going to have a restaurant, or space fit up for one, and you're going to be hard pressed to find some productive or revenue-producing use for that space if you don't continue to use it as a restaurant. 

Besides, you might not want to rip it all out so casually, especially if it might be restored to original condition (and all the more so if you have the local historic properties society or Landmarks Commission tagging along on your project). If that's the case, the silver lining is that you should have the opportunity to create something unique.

Your hotel comes from a day that hotels and restaurants went together (see Michael Forrest Jones' answer to What features of restaurants and hotels have almost completely vanished? ). Today, in most places, they don't. (Frankly, I tend to be somewhat avoidant of them.) So, make sure your friend can market as well as manage a restaurant. Fortunately, historic hotels that are viable rehab projects at all tend to be located in parts of town where establishing a restaurant is a little easier. 

Your friend will still need help from the hotel. What I'd plan on doing is setting my rates so that there's a high, per-extra-person charge (ten to twelve dollars) in the rate, and have each night include a free meal (breakfast would work best for this, but dinner is also an option if the restaurant doesn't serve breakfast). Your night auditor will back out the restaurant revenue from the room revenue on the audit and re-distribute it appropriately, and even if some of the guests don't use their meal coupons, you've still got that much restaurant revenue - and since it's breakage (the only thing you actually sold was a meal ticket, it didn't have to prepare any food or anything for that guest), it's free money for the restaurant. Then, you feel a little less guilty about the rent you're asking your restaurant operation to pay for the space (if it's leased), or you can take fewer excuses if its marketing is failing (if you own it along with the hotel).

If there's a lounge, again, you want something unique that will draw people and again, you want it to be compatible with your hotel and its theme and image. Anything you have in a lounge (or any other part of the hotel) will take up space and, for good or for ill, affect the image and ambiance of your hotel . . . and if you own a hotel, you're in the business of space and ambiance, so you might want to keep control of it. There are other things to consider besides how much revenue you can get for the space.

The Rock Bottom Bar Video : Hotel Impossible : Travel Channel

Doing any hotel lounge can be tricky: you want lots of patrons, but you don't want to appeal to the rowdy, 'party-hearty', hellraiser crowd. On the other hand, an intimate 'gaslight club'-type lounge of the genre pouplar back in the day when your hotel was built might be a little too quiet: it'll draw about twenty or so people a day for business lunches, but be a big overhead item that might not draw too many in the evening.  Possible themes for a lounge are limited only by your imagination, but I'd hunt around for someone with both successful lounge management and marketing experience. 

Gaslight Club, Drake Hotel, Chicago

One thing that you might have going for you: if you're in an uptown area  that's becoming an arts district, if there are several boutique shops  around, if the area's becoming 'hip' - that's been recognized for years  as a sign that a neighborhood is resurging, that gentrification is  beginning. 

You may start modest. Joie de Vivre's first boutique hotel, The Phoenix, in the Tenderloin district of San Francisco - hardly a historic property - began by pursuing business by traveling rock bands, musicians and artists - hardly a consistently good-paying clientele. But with gentrification comes increased property values, in an upward spiral, so that over time, your hotel will not only be worth a great deal more as a real estate investment, but be much more in demand and command a much higher rate.

The Phoenix Hotel, San Francisco, Cal. 

Much of the job of marketing a hotel is not only expanding, but shaping, your customer base. If all you do is go for more of what you already have, you'll find - as many hotels do - that there's only so much of what you already have to be had at the rate you're charging, and the only way to get more of it is to lower your rate; something you do not want to be doing any more than absolutely necessary with this kind of property. 

Fortunately, a restored, historic property is generally known for creative management and marketing; and this should open opportunities for you. 

Since conventional hotel sales and marketing is not my strongest skill, I rely upon just using common sense and doing what works as I go along. (I can do it, but I'd very much love to work out a way to properly supervise sales and marketing people - other than just telling them what I don't want - and consistently get the most out of them.)  

Every new hotel sales manager gets a local list of the top 25 employers from the local Chamber of Commerce - but is there a plan there to reach each of those companies? I use the opposite approach: start with what I already have and expand on it. (Not enlarge. Expand. As in, I start with what I already have, but don't end there. There's a difference. I want more of what I already have if I'm not lowering my rate to get it; but if I get, for example, a couple guys every week from the Chevy dealer, I know to talk to the guys at the Ford and Toyota dealers, too . . . Of course, with either a new hotel or a historic property repositioning, you're not going to have anything starting out. That's where your contacts with the local historic association, your franchise organization, your local alt paper and anyone with whom you had any contact at all arising from the redevelopment process, all come into play. Whether you have an existing, new, or repositioned hotel, you start with what's in your reach, and reach out from that as you attain it. Opportunities multiply as they are seized.) I'm always looking to bring in something new. That's critical for the success of any hotel. 

A successful renovation of a high-profile historic property gives you one advantage, however. Some publicity will occur naturally: more can be leveraged if you know how to manage publicity. (If you're in a large city, I'd look at neighborhood, alt and arts-oriented weeklies, not the big mega-daily.)  This should put a great many prospects in contact with you; rather than leaving you to simply begin with what you have, or throw long bombs at the area's Top 25 employers, with not that many options in-between. 

Have fun with it. Let me know how it works out. I'll revisit this from time to time as I think of more stuff. For now, I've sat up all night having fun with it, so it's time to give it a rest.

Originally appeared on Quora

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