CHICAGO—The recession put a lot of things on hold. Most hotelbrands, for example, allowed owners to curtail expenses by puttingregular property improvement planson the shelf foryears. But now that a recovery seems to have taken hold, manybrands have decided now is the time to implement the plans, knownas PIPs, and press owners to add new amenitieslike big-screen televisions, paint jobs, furniture and signage,among many other features. Many owners have balked at the expense,and some have even decided to cash in now and sell theirproperties, making this a busy time for brokers.

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“PIPS are a big concern because they cost a lot of money,”Jeffrey J. Preston, a Chicago-based vice presidentof HREC Investment Advisors, a company thatspecializes in the lodging and gaming industries, told GlobeSt.com.Preston had been speaking as part of a panel on the current climatefor hotel brokerage at last week's North America HotelInvestment Conference in Chicago. “It scares a lot ofpeople when they first look at the numbers.”

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Preston added that the hotel owners driven to sell by this don'tyet constitute “a flood,” but “many of them do feel up against it.They have survived the past five years, but once hit with a PIP,they feel they don't have a chance to catch their breath.”

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He recommends that owners not do anything rash. The newamenities that brands want to see in their hotels are, after all,things that customers demand. And from what Preston has seen, manybrands have proven they are good listeners, and are willing tonegotiate over what is essential in a PIP, and what can be put offagain.

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Furthermore, a good PIP will increase the attractiveness of ahotel, bring in more customers and boost the value of a property.And with so many buyers in the market for hotels, beginning a PIP,even an expensive one, can ultimately pay off. In fact, the firstquestion asked by prospective hotel buyers is “'what's my PIP goingto be?'” said Chuck Nester, another panelist andpresident of Westlake Village, CA-based Brown NesterHospitality Services. “Having the PIP upfront is a plus.In this market it's one of the major factors.”

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William Sipple, the Denver-based executivemanaging director of the HVS Capital Corp.,pointed out that selling a hotel can take six months. By putting inimprovements and boosting customer satisfaction “you've got anopportunity to grow your NOI and increase your price.”

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And Ted Mandigo, the director of TRMandigo & Co., a hotel consulting firm based in theChicago area, added that those thinking about selling should domany of these tasks, including giving the place a new coat of paintand cleaning up the loan structure, as a matter of course. “It'sthe same thing as if you were selling a residence. And if you go inand do some of those things,” the subsequent boost in value means“you might decide to keep it.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.