Royal Pine Resort Gold Coast: Asset Management Renovation Report

This report provides a comprehensive analysis of the Royal Pine Resort's renovation project on the Gold Coast, Australia. It examines the justification for renovation, focusing on the need to update guest rooms to meet changing customer preferences and increase revenue. The report delves into the feasibility of the design, economic evaluations, and competitor benchmarking to ensure the project's success. It also assesses the impact on stakeholders, including owners, customers, and employees, and explores the use of technology in site selection and financial analysis. Furthermore, the report investigates the environmental sustainability of the renovation and the associated financial risks, concluding with an overview of the renovation management process and the owner's perspective. The report highlights the importance of renovation in asset management, emphasizing its role in enhancing asset value and quality.

Running head: MANAGING OF HOSPITALITY ASSETS
Managing of Hospitality Assets
Name of the Student
Name of the University
Author Note

1MANAGING OF HOSPITALITY ASSETS
Executive Summary
The following report deals with the study of the main renovation in the maintenance of the assets
of a hotel. The purpose of this report is the examination of the renovation project of the hotel
rooms of the famous Royal Pine Resort. The resort is located on the Gold Coast that is
considered a tourism hotspot of Australia. The report anticipates the need for renovation within
the one guest room accommodation of the respective hotel. The financial viability, economic and
the environmental viability of this particular project are reviewed in order to examine the rate of
success of this project of renovation. It is clear from this particular report that renovation is an
important part of the asset management due to frequent asset modification that develops the
value and quality of the asset and adds extra life to the asset. Another focus of the report is on the
various effects of the renovation on the stakeholders as the owners, customers and employees of
this resort. There is also covering of the technologies in this report for the use of the site
selection, feasibility of the project that is based on the analysis of the finance and the role of the
various management executives within the resort.

2MANAGING OF HOSPITALITY ASSETS
Table of Contents
1 Introduction..............................................................................................................................3
2 Justification of renovation........................................................................................................3
2.1 Space for Renovation........................................................................................................3
2.2 Evaluations of Building Quality and design needs...........................................................4
2.3 Feasibility of the design....................................................................................................4
2.4 Economic Evaluations.......................................................................................................4
2.5 Competitor benchmarking.................................................................................................5
2.6 Renovation Management..................................................................................................5
2.7 Stakeholder perspective....................................................................................................6
3 Analysis of the renovation project............................................................................................7
3.1 Site selection technology..................................................................................................7
3.2 Environmental sustainability.............................................................................................8
3.3 Financial analysis and risks...............................................................................................8
3.4 Owner’s perspective........................................................................................................12
4 Conclusion..............................................................................................................................12
References......................................................................................................................................14

3MANAGING OF HOSPITALITY ASSETS

4MANAGING OF HOSPITALITY ASSETS
1 Introduction
The renovation of the assets of the hotel and the spaces are an important part of the
management and maintenance of the hospitality assets (Kang, K. H., Lee, S., and Huh, C. 2010).
This focus of this particular report is on the restoration, which is undertaken by the Royal Pine
Resorts so that there is an increase in the life cycle of the assets of the hotel to meet the demands
of the customers with higher income rate. The following report focuses on this restoration and
renovation plan of the resort’s main master bedroom beach guest accommodation and transforms
it into a royal suite. The renovation requires the change of around 100 hotel rooms and the
concerned hotel area that will add to the new image of the hotel. This enables the renovation to
be termed as a master renovation for the management of this hotel.
2 Justification of renovation
2.1 Space for Renovation
By the analysis of the change of the preferences of the target tourists, the management at
this Royal pine identifies the requirements for the renovation project. The room that is mostly
booked is the Master bedroom that has a beach view due its location facing the beach. This room
is small in nature and accommodates only two people. There is no internet service in the room
but the reception of the hotel and the lobby has the provision of internet facilities. The Hotel has
undertaking the process of renovation to increase the size of the room to accommodate more than
two individuals and the facilities to the guests due to the increase in the demand of this beach
view room by the tourists. There is also a plan to renovate the lobby section of the hotel and the

5MANAGING OF HOSPITALITY ASSETS
beach facing room to provide an aesthetic feeling and give a mark of it as the royal suite
(Jefferies, 2000).
2.2 Evaluations of Building Quality and design needs
The beach: the view of this Royal Pine offers occupancy of 75% over the year. The focus of
the renovation plan is mainly on the interior designing of the rooms in particular. The plan is
explained below:
 There has to be increase in the room size to accommodate more than two people.
 There should be a king size bed with two small couches.
 The room should be designed with luxury ceramic tiles and not carpets and wall covers.
 The tufted headboard should have a master bed and couch with the usage of crystal or
ocean blue colors for the tiles and walls in the interior.
 The floor plan that has been stated is 22.0’ * 56.0’ (L*W) which is the total of 1232 ft in
dimension, 12.0’ in height (Kimes, 2011).
 Each room should have Wi-Fi facilities.
 The room has to be extended for the construction of the lobby that is facing the beach.
2.3 Feasibility of the design
The incorporation of the design plan is done with keeping in mind the notion of the
feasibility of its success. The change will take place within the period of 8months from its
commencement time. The interior decoration will take less time by employment of more labor,
as there has been no change and renovation in the electricity, water facilities and the inbuilt
construction. The management of the hotel has also made the forecast in the matters of finance to
assess the financial viability of this project (Kirk, 2010).

6MANAGING OF HOSPITALITY ASSETS
2.4 Economic Evaluations
The total estimated reconstruction cost for one room of the hotel is around $25 million that
has been projected by the local contractors who have taken into consideration the changes that
have been made in the area of the furniture, fixtures, equipments and extensions. The plan of the
management of the hotel is to secure the loans that have been taken from the commercial banks
for the finance of the renovation project. The banks in the issue of investment have adopted a
conservative approach analysis (Sturman, Corgel and Verma, 2011). The increase in the growth
of the tourism sector of the Gold Coast produces around $4.7 billion per year, which shows that
the economic conditions of the hotel are favorable for the investment. The loss in the revenue
due to the one room, which will be renovated, has an expense of around $21 million. Thus, a
50% mortgage loans on a monthly payment terms for 15 years as the financial source can be
applied for. The time for management is the summer time as the tourists at that time are low and
the loss due to the renovation will be low.
2.5 Competitor benchmarking
The competitors of the Royal Pine are the Hilton Surfers Paradise Hotel, Crown Plaza and
InterContinental resorts. To enhance the quality of the room space the Hotel require to establish a
benchmark when the interior are being designed and the planning for the renovation when
compared with other competing hotels. For example, the InterContinental hotel provides rooms
which has attached breakfast gardens and special king garden accommodated rooms. The Royal
Pines has planned to add the beach facing lobby that will be personalized and the 3D feel to the
structure of the room keeping in mind the aesthetic and scenic view standards. The Hilton
Surfers Paradise Hotel is enable with wifi that the needs of the overnight visitors (Kang and Cao,
2012).

7MANAGING OF HOSPITALITY ASSETS
2.6 Renovation Management
The project of management involves the addition of the extra space to the rooms that
already exist at present. Therefore, the management of the renovation will be with the original
management team of the Royal pine. The company may appoint the expert company as the Hotel
renovations and maintenance P/L which is an Australian Company that engages in the practical
constructions and interior designing of the hospitality sectors. The plan of the company is to
enter into a major contract with the project construction company with a view of making the
payments according to the completion of the renovation as the high quality and design that are
set by the Royal Pine (Koh, 2008).
2.7 Stakeholder perspective
The concept used foe management by the Royal Pine is the concept of the Stakeholder
mapping which prioritizes the stakeholders who will be affected by the process of renovation and
the production of strategies to manage them. The visitors will experience a memorable
accommodation by enhancing the interiors of the room and the addition that will be made to the
lobby. This renovation and reinvestment in the improvement constructions will help in the
growth of the life cycle of the asset of the hotel spaces and the assts and hence will reduce the
preventive cost of maintenance of the hotels. This will enable the attraction of more footfall and
increase in the generation of the revenue (Lawson, 2012). The Hotel requires keeping the
commercial banks and the tourism sector satisfied due to the concerned parties granting legal and
financial permissions. Hence, the presentation of the financial viability of this project and the
generation of past revenue with the forecast of the future revenue will help the Royal Pine to
manage the stakeholders.

Keep satisfied
(Banks, government and tourism sector)
Monitor (competitor hotels)Keep informed (Employees of Royal Pine, management, shareholders and investors)
Manage closely (tourists and visitors)
High
Low
Low High
Power
Interest
8MANAGING OF HOSPITALITY ASSETS
3 Analysis of the renovation project
3.1 Site selection technology
The selection of this renovation project in the Royal Pine will depend on certain factors.
According to Walker and Walker, based on the data of the historical occupancy and the average
rate data portion of the hotel provides a significant amount of revenue that should be selected for

9MANAGING OF HOSPITALITY ASSETS
renovation. The rate of occupancy and the average revenue of the hotel room in the Hotel will be
presented and compared for selection of the site for renovation (Walker and Walker 2012).
According to Penner, Adams and Rutes the revenue per the available room is also an effective
tool for measuring the high yielding rooms. The calculation of the return is essential due to the
interior; renovation and addition are a part of the capital expenditure. The revenue of the per
room available is calculated by multiplying the average revenue of the Hotel with the rate of
occupancy that shows the beach view rooms are important contributors to the revenue of the
Hotel. These rooms have prime locations and therefore the demand for them during the peak
season. Thus, the investments in the restoration of these rooms will help the Hotel to increase the
charges of the rooms to secure more amount of revenue (Penner, Adams and Rutes 2013).
3.2 Environmental sustainability
The renovation will help to improve the environmental sustainability of the hotels in
concern. The Royal Pine focuses on the addition of the lobby to the rooms that will face the
garden of the resort and the beaches along the Gold Coast (Deroos, 2010). The usage of this open
space will help the Hotel to highlight on the environmental sustainability of the project of
renovation in the near future and attract more tourists. The use of the ceramic tiles will help to
maintain sustainability in the luxury rooms. The optimal 3D orientation layout of the rooms will
enable tom provide space to the visitors and the wide windows will ensure sunlight, breeze and
the feeling of the beach with the facility of accommodation. The management will also cover the
windows with solar radiation blocking glass doors to create a soothing climate within the
interiors.

10MANAGING OF HOSPITALITY ASSETS
3.3 Financial analysis and risks
To check the financial viability of this renovation project at the Royal Pine the
management of the company has conducted a financial analysis as a whole of the percentage of
the occupancies which have resulted in the renovated hotels compared to the non-renovated ones
(Kirk, 2010).
Figure 1: Changes in occupancy penetration rates for renovated and non-renovated hotels
(Source: Zhu, Franko, Pavelchak and DePersis, 2012, pp-170)
The graph shows the occupancy of the renovated hotels that has increased in the recent years
when compared to the occupancy at the non-renovated hotels. The figure below shows the
overall revenue per room available penetration rate of renovated hotels in comparison to the non-
renovated hotels. The figure below shows that in the initial stage the revenue per room available
increases for the renovated hotels and the trend decrease after a certain time. This shows that the
hotel assts renovation has to b done in every two years to maintain the financial gains. The
analysis of the financial conditions shows that this renovation will be profitable for the
management of the Royal Pine.

11MANAGING OF HOSPITALITY ASSETS
Figure 2: RevPAR penetration for renovated and non-renovated hotels
(Source: Zhu et al. 2012, pp-170)
Net present value of Renovated hotels (Assumed figures)
Year Net income ($) Discounting factor (12 %) Discounted cash flow
2009 20,000,000 0.89286 17857200
2010 14,800,000 0.797 11795600
2011 18000000 0.711 12798000
2012 20409000 0.635 12959715
2013 24200000 0.567 13721400
Estimated value 69131915
Total value 190,000,000
NPV 120,868,085
Table 2: Net present value of the renovated hotels

12MANAGING OF HOSPITALITY ASSETS
(Source: Deroos, 2010, pp-98)
2009 2010 2011 2012 2013
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
20,000,000
14,800,000
18,000,000
20,409,000
24,200,000
Income projection
Income projection
Figure 3: Income projection
(Source: Deroos, 2010, pp-18)
The income projection is necessary as it depends o the projection of the management of the hotel
that has decided to take up decision of renovation. The return on the investment is at 12%. The
life cycle maintenance is ascertained before taking the decision of the renovation. This is because
if the maintenance does not result in the increase of the life cycle of the hotel then the renovation
will not be productive.
The management at the hotel Royal Pine has an estimate of $ 10,000,000 and a payback of 3
years. The determination of the payback time shows that the respective hotel plans to regenerate
the amount of the investment within 3 years. The maintenance of the renovation is a part of the
capital expenditure and is taken by the hotel companies to add to the life cycle of the hotel.

13MANAGING OF HOSPITALITY ASSETS
The management has made a risk analysis of the concerned project confirming the project of
renovation to be undertaken for a year and might have a few risks:
 Disruptions by the constructive noises
 The hindrance of the customer due to air, dust chemical and moisture pollution caused
from the outgoing construction processes
 The overpopulation in the hotel, lobby because of the presence of the construction
workers that damage the aesthetic presence of the hotel.
 The financial loss from the reduction in occupancy level.
 The non-acceptance of the new innovated interiors by the customers.
3.4 Owner’s perspective
The manager’s main concern is regarding the profits that will arise from the renovation
project. The high NPV and the revenue per room available penetration strengthens the decision
to make investments in the renovation project to get benefits of the increase in the revenue
growth and addition of the quality image of the hotel. The main advantage of the managers is the
increase in the life value of the assets of the hotel that is possible by the process of renovation
(Walker and Walker, 2012).
4 Conclusion
Thereby the following report focuses on the need for the renovation of the assets and the
spaces in the hotel industry. The renovation of the beach view rooms that are the main earner for
Royal pine is necessary to make the resort gain competitive advantage over other resorts and
hotels who offer sufficient amount of luxury services. The main risk is the loss of revenue from
the 100 rooms that the resort will face for a year until the completion of the renovation process.
The increase in the price charge of the room for the compensation of the financial loss may
reduce the footfall of the tourists. Nevertheless, the renovation of the assets of the hotel is needed

14MANAGING OF HOSPITALITY ASSETS
for the purpose of life cycle management and reduction of the preventive cost of maintenance or
the breakdown of any asset of the hotel. The process of renovation is undertaken to meet the
changing needs of the customers.

15MANAGING OF HOSPITALITY ASSETS
References
Denton, G. A., & White, B. (2000). Implementing a Balanced-scorecard Approach to Managing
Hotel Operations The Case of White Lodging Services.Cornell Hotel and Restaurant
Administration Quarterly, 41(1), 94-107.
Deroos, J. A. (2010). Hotel management contracts—Past and present. Cornell Hospitality
Quarterly, 51(1), 68-80.
Hotels, R. (2012). Resorts. Managed Funds: HEI Funds.” HEI Hotels & Resorts, nd Available a
t http://www. heihotels. com/managed_funds/HEI_funds. html. Accessed February, 15.
Jefferies, E.J. (2000), ``A preliminary investigation intofacilities management in hotels'',
unpublished BA(Hons.) dissertation, University of Strathclyde,Glasgow
Kang, F., & Cao, R. J. (2012). Space Integration and Quality Details—An Analysis of the
Design of Shanxi Lvliang International Hotel. Applied Mechanics and Materials, 174, 1726-
1729.
Kang, K. H., Lee, S., & Huh, C. (2010). Impacts of positive and negative corporate social
responsibility activities on company performance in the hospitality industry. International
Journal of Hospitality Management, 29(1), 72-82.
Kimes, S. E. (2011). The future of hotel revenue management. Journal of Revenue & Pricing
Management, 10(1), 62-72.
Kirk, D. (2010). Environmental management for hotels. Taylor & Francis.
Koh, Y. L. (2008). Healing Interior: Using Eastern Design Principles in Hotel Design.

16MANAGING OF HOSPITALITY ASSETS
Lawson, F. (2012). Restaurants and foodservice facilities. Metric Handbook: Planning and
Design Data.
Penner, R. H., Adams, L., & Rutes, W. (2013). Hotel design, planning and development.
Routledge.
Sturman, M. C., Corgel, J. B., & Verma, R. (Eds.). (2011). The Cornell School of Hotel
Administration on hospitality: cutting edge thinking and practice. John Wiley & Sons.
Tagliabue, L. C., Leonforte, F., and Compostella, J. (2012). Renovation of an UNESCO heritage
settlement in southern Italy. ASHP and BIPV for a “Spread Hotel” project-Elsevier Applied
Energy.
Walker, J. R., and Walker, J. T. (2012). Introduction to hospitality management. Pearson Higher
Ed.
Zhao, X., Ma, C., & Gu, P. (2012). Energy Saving Methods and Results Analysis in the
Hotel. Energy Procedia, 14, 1523-1527.
Zhu, J., Franko, E., Pavelchak, N., and DePersis, R. (2012). Case Study: Worker Lead Poisoning
During Renovation of a Historic Hotel Reveals Limitations of the OSHA Lead in Construction
Standard. Journal of occupational and environmental hygiene, 9(9), D167-D171.

17MANAGING OF HOSPITALITY ASSETS