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The Cap-Ex Dilemma

As owners and operators tried to maneuver their way through the last few years of economic woes, plans for significant capital expenditures to hotel properties moved to the back burner.  This was not done in secret andfor the most part, branded operators permitted many capital projects to be deferred.  We hear and read that the days of deferred capital expenditures and property improvement plans (or “PIPs”) may be coming to a close. This is particularly the case with what many refer to as “guest facing amenities,” the things that the hotel guest sees or experiences that might have a negative effect on the guest experience. Understandably, maintenance of brand standards are important to any branded hotel operating company.  On the other hand, many markets continue to experience performance at levels that may cover debt service, but do not leave much after that.  As we head into the fall conference season, owners and operators will likely need to assess their  desire for capital improvements to proceed  -- and their capacity to make them happen.

©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume I, Number 327


About this Author

Nelson Migdal, Greenberg Traurig Law Firm, Washington DC, Real Estate Law Attorney

Nelson F. Migdal is Co-Chair of the Hospitality Practice. He focuses his practice on the acquisition and disposition of hotels, hotel operations and management, franchising, licensing and branding, development and finance, large mixed-use projects, hotel management agreements, licensing agreements, commercial real estate acquisition and sale, and commercial leasing.

He has prepared and reviewed management and franchise agreements, purchase and sale agreements, multiple building covenants, and other documents related to the acquisition, financing...