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Master renovation from due diligence to delivery
https://www.hotelinvestmenttoday.com/From-Our-Partners/Master-renovation-from-due-diligence-to-delivery?
By Stefani C. O’Connor
NATIONAL REPORT — With many industry developers and investors hitting the pause button on new hotel construction due to tight economics, renovations, conversions and PIPs are now on the front burner for hoteliers — and brands — looking to accelerate consumer and revenue momentum across their assets.
How stakeholders can best do that while corralling costs and making sure every aspect will pencil was the focus of a panel of experts speaking on Hotel Investment Today by Northstar’s recent webinar, “Mastering a Hotel Renovation Project: From Due Diligence to Delivery.”
Industry veterans offering a variety of suggestions and vetted solutions were: Patrick McMonigle, senior director, asset management, Access Point Financial; Darrin Phillips, CEO, Top Shelf Project Management; Kara Randall, vice president, luxury and mixed-use development, Hilton; Kellie Sirna, owner and principal, Studio 11 Design; Rob Smith, CEO and president, Stonebridge; and Juan Corvinos Solans, president, HE CALA, Hotel Equities.Mary Scoviak, custom and design content director, Hotel Investment Today by Northstar, moderated the live Nov. 13, 2025, broadcast, which is now available on demand. Top Shelf Project Management was the topic sponsor. (The company collaborated on the webinar planning but had no influence over the editorial content.)
Here is their roadmap for maximizing ROI in every crucial phase of the renovation lifecycle.
Do the real math that earns lender buy-in
A solid start to a renovation project is understanding its financial scope, McMonigle said. “We're very concerned about the current rising cost environment and how accurately our borrowers are budgeting the renovations. We hire experts (like Phillips) to help us underwrite, as well as monitor, the renovations, so we ensure we have sufficient funds in place to complete the project,” he said.
Patrick McMonigle on tariffs
At a time when “sufficient” could vary with intra-day changes on issues from tariffs to interest rates, McMonigle recommended keeping a clear focus on the actual impact of factors like these on your balance sheet rather than doing the math according to the headlines.
“It's pretty uncertain,” said McMonigle, noting, “A lot of the cost per key is really being borne by products that you're procuring internationally…FF&E isn't all your costs…You’re looking at 20% of your project, not 100%…so, maybe that 20% becomes 5% to 10% in your overall project cost.”
Sirna doesn’t see tariffs impacting Studio 11 yet, although the designer is adding 4% to 5% on average to the contingency. “Our manufacturers have really taken on a big part of this and absorb a lot of the cost…I think as as things go on they're going to…have to start forwarding those costs,” she said.
McMonigle added that tariffs aren’t the only concern. “We are seeing cost creep on the projects we do have and we're spending more time on our diligence to make sure we have a realistic project budget and that we're properly capitalized to complete the renovation. All of our loans have renovation completion guarantees. Typically, the equity goes in before we fund our debt portion of the renovation,” said McMonigle.
Ideally, he said, at loan origination Access would like to see a signed GC contract, a purchase agreement for the FF&E and all the hard costs in place. “But in reality, when you're buying a hotel, you're kind of doing your diligence, and that's coming later…in all projects, the…protection is having a healthy contingency. If you have a good 10% contingency in there, you can weather a lot of the bumps in the budget that occur when you start pricing things and the deal becomes real,” he said.
Having collaborators who can identify incremental revenue opportunities can also help smooth out those “bumps,” Sirna noted. “It’s really all about programming and having us come in early on in the process,” she said, citing a current project where her team created flex spaces that can be transformed to encourage different types of guest interactions and potential revenue streams.
Use these best practices to control costs, mitigate risk
Phillips stressed each renovation, conversion or PIP is “really specific” and stakeholders need to understand what the goal of the project is rather than just fixating on an estimated cost per key. “Everybody wants to focus on cost per key, but that's the end of the math equation,” said Phillips.
Being knowledgeable about a project’s scope and leveraging relationships throughout the entire process also are key components to helping tamp down costs. “You have to know the region. You have to know the suppliers. You have to have adequate contingency,” said Phillips.
“Honestly, the biggest thing you can do as an owner is [have] speed. Have the proper team, have the proper funding, because as soon as you start slowing up, you're now allowing for market changes that you can't predict,” he added.
Darrin Phillips on the value of speed
Nothing was as unpredictable in recent times as the COVID-19 pandemic, which Stonebridge’s Smith sees as a factor hoteliers are still dealing with when it comes to renovations, or more notably, the lack of them.
“I believe in the next 12 to 24 months, if things ease up and there are a lot of transactions, you're going to see costs even go up more because of the tremendous demand that's going to be created from the pent-up situation,” he said.
Tell a story that gets brands aligned
To brace for that possibility, Smith said one of the most important things for owners is to work with the brands. “Ownership perhaps hasn’t changed, but the timelines have changed. You can get certain things complete at the beginning of that timeline and then taper [to] less guest-focused or guest-touch areas further down the line to make it more palatable for the completion of the project,” he said.
Owners looking to go further, including seeking PIP waivers from their brands, need to make sure their requests are “reasonable,” according to Randall.
Kara Randall on sector
“I think the brands are flexible, especially as you move up the chain scale. We all understand we're in a dislocated real estate market right now, where ground-up development is very challenged, and I think all the brands are very focused on conversions and renovations…I think all PIPs, especially going full service and up, are negotiable to some extent,” she said, and encouraged owners to have experts on their side who understand the validity of the ask and can guide the process.
Smith said in the past 12 months he’s observed the brands looking at GSS scores, how the hotel is being operated and what customers are saying. “[That’s] going to drive leeway and help determine whether or not they give you some of that extra time to get things done,” he said.
Solans stressed the brands have to understand a PIP really cannot be a “desktop PIP” but it’s up to owners to make their case.
“Somebody needs to walk the property…You need to explain to the brands really clearly what you are trying to do with this asset,” he said, particularly if looking for leniency or a waiver. “A renegotiation with the brands always has to be on reallocation and not elimination,” said Solans.
Juan Corvinos Solans on desktop PIPs
Randall added if somebody comes with a plan and a vision that’s cohesive and a good end result “that tell your story in an effective way, the brands will come around a lot of times. Having really strong asset managers also is very helpful in things like this and consultants can help you tell that story,” she said.
There's no one-size-fits-all when launching a hotel renovation project, said Phillips. “You're putting a jigsaw puzzle together. The only way you can do this correctly is if you have a good operator. You have to have a good team all the way around…teams that [have] knowledgeable experts in them,” he said.
Randall maintained, “it's a case-by-case basis” for where owners should be putting their CapEx to maximize the return on their investment. “For luxury, we often require two restaurants. We're getting more flexible with maybe allowing a leased space. That’s one way to cut down an owner's expense,” she said.
She advised investors to show not just tell their story. “An investor needs to come to the brands with a plan and a vision — and visuals help. Not everybody that's a stakeholder in the brand truly understands construction and what it takes to get the hotels to a certain level. When you can show your vision and it's a cohesive vision with a good end result and you are really telling your story in an effective way, the brands will come around a lot of times. Having really strong asset managers also is very helpful in things like this and consultants can help you tell that story.”
Rob Smith on GSS scores
Assessing the reality of a deal is another key to a successful renovation/conversion process, said Smith, particularly in terms of market share. “If you're going to decide to build a luxury product in a market where there is no luxury product and not just expect the premium rate in the product, but expect to change the customer, that's not the right business plan…we’re really looking at what the current values in the market are, where [the project] would sit in a comp set by location and what we can achieve by the investment to make sure it makes sense,” he said.
Sirna’s seeing owners’ interest in upscaling in her current project pipeline. “I'm getting a lot of owners wanting to elevate their lifestyle project to be considered luxury. So, we're really prioritizing those luxury moments,” said Sirna.
However, she’s also prioritizing elements that drive guest loyalty and ROI. ”The question is, ‘What is the guest going to remember? What is the guest going to take a picture of? How are they going to experience that? And then what moments can go away? As an example, a Thompson Hotel we recently completed, like, the flooring was really beautiful. It was wood and stone, and very expensive. But would guests remember that? For us, the answer was no. So we used large format, through body ceramic tile. It's absolutely beautiful and the cost savings there allowed us to put money into other luxury moments that the guest is going to notice.”
Kellie Sirna on PIP waivers
Phillips’ advice to owners to get a grounded, accurate budget that also has flexibility is to “know your asset.” “If you have a good set of documents, you can get a boilerplate AIA contract, change the terms that are applicable to your organization and attach your design documents. You can have a pretty tight contract if you're talking about contractors,” he said, adding, “If you want to have a good estimate, you have to understand what the end goal is of the project…the brands always talk about a cohesive design, but nobody really talks about cohesive project planning.”
And to ultimately get to delivery, Solans emphasized: “Don't change the orders…There’s a scope, there's a timeline and there is a process. Once you've gone through it, unless you have a catastrophe and you have a supply-chain disaster, change orders is what delays every single project in construction.”
McMonigle suggested owners who have the money to renovate should consider doing it now “because there's not a lot of activity and the general contractors are hungry for work. But fast-forwarding, when they start getting a full pipeline, they're going to raise their fees and labor is going to be tighter and it's going to be harder to source your subcontractors.”
And to ultimately get to delivery, Solans emphasized: “Don't change the orders…There’s a scope, there's a timeline and there is a process. Once you've gone through it, unless you have a catastrophe and you have a supply-chain disaster, change orders is what delays every single project in construction.”
Stefani C. O’Connor is a journalist based in New York City.
Known for its value vacations, the D.R. expanding in luxury
DOMINICAN REPUBLIC – The Dominican Republic, long a top Caribbean destination known for its value-oriented all-inclusive resorts, is in the midst of a luxury room boom, with nearly 15,000 new accommodations expected over the next three years, many in the upscale segment.
The roughly 18% increase in room inventory is skewed toward the higher end of the market, said Michael Cummings, managing director for valuation and advisory services at CBRE.
“The luxury segment is continuing to increase, with more than 1,000 upscale rooms set to open just in Miches this year,” Cummings said.
Miches, a relatively new tourism area located roughly 60 miles west of Punta Cana, has seen significant investment. Secrets, Dreams and Zemi all-inclusives debuted in Miches earlier this year, each with 500 guestrooms. A Four Seasons luxury resort and residential complex spanning 60 acres along Playa Esmeralda is slated to open in 2027.
At the same time, the Dominican Republic’s flagship destination, Punta Cana, is experiencing its own upscale push. Earlier this year, Punta Cana welcomed the 200-room St. Regis Cap Cana and the 340-room W Punta Cana, the W Hotels brand's first all-inclusive.
Next year will bring the opening of Moon Palace The Grand Punta Cana, a $1.5 billion luxury all-inclusive project with two 18-story towers and 2,171 rooms. Daniel Adolfo Conte, vice president of commercial relations at The Palace Company, said the Moon Palace will be the D.R.’s largest single resort by room count.
“Our [plan] is to bring a complementary demand into the island,” Conte said. “And bringing people who are used to properties like ours in Cancun -- and that same level of service and ADR as well -- to Punta Cana.” (Starting rates at Moon Palace The Grand Cancun hover around $700-$1000 per night.)
Conte acknowledged, however, that delivering on luxury service at that scale will require significant workforce investment. The Palace Company is in the process of recruiting employees and is also implementing a comprehensive training program. It is sending around 300 staff from Cancun to work in Punta Cana and roughly 500 staff from the Dominican Republic to Mexico to work and train before the opening.
“We really need to make sure we have the standard of services we are offering in Cancun, and this is the best way to do it,” Conte said.
The project also calls for the building of the Ciudad Palace for hospitality workers, with 1,800 apartments, schools, a hospital and other facilities that will eventually house and serve more than 12,000 people.
“One of the biggest issues in Punta Cana right now is that [resort workers have to] travel hours to get to work and then hours to go back, or sometimes they need to live far from their families,” Conte said. “We are going to give people the chance to live with their families very close to the property.”
Other brands are also planning premium expansion in Punta Cana.
Nobu Hotels has announced plans to open the 200-room Nobu Hotel Punta Cana, while Palladium Hotel Group is adding to its existing resort complex in Punta Cana with the debut in December of two all-inclusive concepts: the Grand Palladium Select Bavaro and the Family Selection at Grand Palladium Select Bavaro.
Simon Suarez, vice president of Grupo Puntacana and a director emeritus on the Caribbean Hotel and Tourism Association’s executive committee, credited government investment in new areas of the country on infrastructure, including roadways, water, sewer and electricity. “All the elements that are important,” he said.
Signs of hotel softness
Despite the expansion, hotel performance metrics have shown some softness, even as the D.R.’s 5 million international visitor arrivals from January through August was up roughly 1% year over year.
The country’s hotel and tourism association reported average hotel occupancy of 77.7% for January through August 2025, down 1.5 percentage points from the same period in 2024. August occupancy of 69.5% was down 3.7 points year over year.
CoStar data showed September occupancy had dipped to 49.3% from 53.4% the prior year, and average daily rate (ADR) declined 5.5%, to $167.92. While Jan Freitag, national director of hospitality analytics for CoStar Group, characterized the decline as a potential blip related to calendar shifts, he also said D.R. occupancy had declined for five consecutive months through August, with ADR remaining flat at about $220.
Freitag pointed to cruise competition as a potential factor.
“If you look at cruise performance in terms of passenger volume and increases in rate, they have done phenomenally well,” he said. “And I think there’s probably a siphoning off of the leisure, value-oriented traveler from hotel stay to cruise.”
Note: This story first appeared in Travel Weekly
Mexico, D.R. still LATAM’s hottest markets
INTERNATIONAL REPORT – Lodging Econometrics recently reported the Latin America construction pipeline stood at 751 projects and 116,480 rooms at the end of 3Q25, representing year-over-year (YOY) increases of 17% in projects and 11% in rooms. However, Hotel Equities Juan Corvinos, who has spent 12 years developing in the region, said those numbers are loaded with dead projects and it is time to clean up the LATAM pipeline data.
“In short, it’s a bubble,” he told Hotel Investment Today as parent company The Burba Hotel Network prepare for ALIS CALA 2026, April 28-30, at the Loews Coral Gables Hotel, Coral Gables, Florida. “When you look at the data, there’s a lot of projects that were signed during 2018-2020 but have not started. So, yes, the pipeline continues growing, but the brands haven’t terminated. A lot of the agreements are not moving.”
Corvinos said there needs to be “a flushing of the pipes” on the data. “There’s a lot of projects in there that need to be either terminated or removed from the from the pipeline for us to really know if there’s growth and signings versus opening.”
He continued that the bigger brands sign about 135 projects in Latin America every year, while opening around 20 hotels. “There’s no correlation between signings and openings when there normally should be,” he said.
“We need to reset expectations about the growth,” Corvinos added. “There is growth, I agree, but we need to establish a baseline of projects that are basically dead or inactive for us to establish the real growth.”
In response to Corvinos’ comments, Lodging Econometrics Senior Vice President, Director, Global Business Development Bruce Ford said they have cancelled or postponed more than 25,000 rooms from the Latin America pipeline in the last 12 months, thus removing them from the active pipeline. “We do actively work the projects every month to keep the pipeline as clean as possible,” he said.
On another note, Ford said projects that have signed in recent quarters are entering the pipeline with longer timelines to begin and actually reach the construction phase. “The timeline has lengthened in every region of the world for new projects that are announced,” he added.
More LATAM data
Lodging Econometrics’ Q3 report also provides insights into the region’s hotel pipeline by chain scale. Notably, the luxury and upper upscale chain scales hit record-high project counts at Q3. The luxury chain scale closed the quarter at 143 projects/27,387 rooms, while the upper upscale chain scale reached 124 projects/22,420 rooms, and the upscale chain scale reached 144 projects/20,904 rooms.
Geographically, Mexico reached an all-time high with 264 projects/40,412 rooms, accounting for 35% of both the total project count and room count. Brazil followed with 123 projects/16,272 rooms, up 19% by project count YOY. The Dominican Republic continued its strong growth trajectory with 81 projects/17,351 rooms, representing a 37% increase in project count and 20% increase in room count YOY. These three countries combined account for 62% of all the projects and 64% of the rooms in Latin America's construction pipeline.
The cities with the largest pipelines in Latin America include Mexico City with 28 projects/3,273 rooms, Lima with 16 projects/2,206 rooms, and Riviera Maya with 16 projects/2,088 rooms.
Corvinos said he expects the data on Mexico to prune itself, but added when he looks at the rooms coming into the Dominican Republic he’s “scared.”
“I actually just told an owner, against my interest, please don’t develop this hotel [in the Dominican Republic] because there’s too much inventory coming in and we’re not going to be able to do well when if all this product is developed,” Corvinos said.
What Corvinos does like is luxury development with residential in market like Mexico City, as well as conversion opportunities for focused service in Mexico. He likes the recoveries going on in Peru, Chile and Colombia after their new presidential election. He likes some sustainable development on Caribbean islands like Curacao.
Looking at more organic growth, Corvinos said he is seeing a lot of affiliation brands coming up and mentioned Best Western, Small Luxury Hotels, Design Hotels and Best Western-owned WorldHotels.
Opportunities, challenges
When asked about the sustainability of the growth momentum in the LATAM region, Grupo Posadas Vice President of Development Mauricio Elizondo said they are seeing more conversions as ground-up has been more challenging. “We do see Mexico and the Caribbean as the fundamental strong markets due to steady airlift,” he added.
John McCarthy Sandland, executive chairman, Leisure Partners, Los Cabos and Mexico City, added, “The region’s pipeline growth reflects both pent-up demand and renewed confidence in long-term fundamentals: strong demographics, rising intra-regional travel, and sustained global interest in leisure and mixed-use hospitality. While financing and permitting timelines vary widely across countries, I believe this momentum is sustainable, especially in markets with stable tourism policy and private-sector leadership.”
We also asked sources to name their favorite markets with Elizondo touting Los Cabos, Mexico, and Punta Cana, Dominican Republic. Looking ahead, he added that the Dominican Republic may keep growing as some newer destinations launch.
McCarthy added that Mexico remains his clear favorite — particularly Los Cabos, Nayarit, and Mexico City, each offering very distinct demand drivers and a mature development ecosystem. “I also have great admiration for the Dominican Republic, where a consistently pro-investment attitude and coordinated government support make the environment particularly attractive,” he added.
Mexico’s scale, brand presence, and infrastructure keep it at the top of the regional pipeline, according to McCarthy, and he expects that to continue. “However, the Dominican Republic, Colombia, and Costa Rica are emerging as strong up-and-comers, each balancing tourism growth with a pragmatic approach to investment and sustainability,” he said.
Rogerio Basso, principal at Miami-based Impactum Capital Advisors, said Mexico’s scale, diversified destinations, and well-established operator ecosystem ensure it will likely remain at the top of the regional development pipeline. He added, however, that the Dominican Republic, despite Corvinos’ warning, stands out as the region’s strongest up-and-comer, driven by a pro-tourism government agenda and a robust local financial system that has long supported the sector.
“The D.R. continues to lead the Caribbean in new supply and airlift expansion, with more than 177 new or reinstated regional routes and several international brands under development — including W Punta Cana, St. Regis Cap Cana, and Four Seasons Tropicalia,” Basso said. “The government’s consistent investment incentives and pro-business stance, coupled with the strength of domestic lenders such as Banco Popular, Banreservas, and BHD León, continue to attract both regional and international capital. New destinations like Miches and Pedernales are diversifying the tourism map, complementing the established Punta Cana, Puerto Plata, and Romana-Bayahibe clusters and reinforcing the D.R.’s position as one of the Caribbean’s most dynamic investment environments.”
As for the segment with the most potential, Posadas is present across all segments, according to Elizondo, so they have a balanced portfolio and have projected openings and further pipeline ranging from economy to luxury.
Luxury continues to lead, according to McCarthy, driven by international brands seeking experiential destinations and affluent domestic travelers trading up. “That said, the economy and midscale segments still present compelling long-term opportunities in secondary cities, especially when tied to industrial corridors and airport expansions,” he said.
Not surprisingly, conversions are dominating the pipeline with Elizondo stating 70% of Posadas’ work has been with existing product.
McCarthy added that while conversions are growing, especially in urban markets, new builds remain the main driver — particularly in leisure destinations and integrated resort projects where brand standards and design DNA are central to value creation.
Even with the enthusiasm for LATAM development, construction costs and financing remain challenges.
“The greatest challenge remains the availability and cost of capital, combined with regulatory delays,” McCarthy explained. “Yet, with well-structured projects, strong operators, and credible local partners, the appetite from both domestic and international investors is clearly there.”
Basso added that across the Caribbean, project economics are being tested by escalating construction costs, rising insurance premiums and limited coverage, and ongoing vulnerability to natural disasters. Yet the most pressing constraint remains the availability and cost of capital. He said traditional bank financing is concentrated among a small number of regional lenders, many of which face exposure caps to large hospitality borrowers.
“To sustain growth, the region needs broader financial-instrument optionality and access to new investor pools — including family offices, institutional investors, pension funds, and insurance companies — that bring longer investment horizons and diversified risk appetites,” Basso added. “The introduction of sustainability-linked financing, blended capital, and potential tokenization of real-estate assets could further expand liquidity and help de-risk project pipelines. The long-term outlook remains positive, but capital efficiency, resilience, and innovation will define the next growth chapter for Caribbean hospitality.
“Despite some near-term headwinds, the Caribbean’s fundamentals remain solid. The next wave of growth will hinge on how effectively the region expands its capital base and develops a more innovative financing toolkit to meet the evolving needs of hospitality developers.”
Transaction momentum
From a transaction’s perspective, all was moving along – in typical Caribbean/Mexican fashion – until Liberation Day in early April, according to Berkadia’s Miami-based Managing Director Fernando Garcia-Chacon. “We were marketing a handful of resorts and part of our brokerage team was in New York pitching the deals when Trump announced the tariffs. The market came to a standstill and did not move for the next two months. One of our PE clients commented that if he was to bring a deal to his investment committee, he would be fired on the spot, regardless of the economics of the transaction.”
Fortunately, Garcia-Chacon continued, the market has softened slightly (in a good way), and at least clients will take their calls now. “Nevertheless, just as you are seeing here in the U.S., there is still a gap between buyers and sellers. Many of the 9 to 10 caps that we were used to quoting on resort pricing is no longer applicable given the increase in interest rates. And owners are reticent to accept a lower price.”
Garcia-Chacon called the Playa-Hyatt deal a real positive for the market, certainly for the all-inclusive segment. “That was a real vote of confidence for the space as historically, institutional investors have shied away from these types of resorts,” he said. “But now, with KSL stepping in, it does provide reassurance that this is a true investment category. And everyone is ready to pour over the filings once the transaction closes (hopefully be year-end) and more detailed financial parameters are shared. I believe this will help plant a flag in the land of pricing.”
One area of interest for deals is the Dominican Republic, according to Garcia-Chacon. “We have seen the emergence of local pension funds that have an appetite for hotel product,” he said. “They don’t move fast, but under the right circumstance, they will acquire existing hotels.”
He also pointed to the Dominican Republic government’s pro-tourism stance, pushing the development of several new destinations inside the island (i.e. Pedernales) as well as existing ones (Puerto Plata). “The truth is that the entire island has truly evolved – a new St. Regis opened this year, a Four Seasons is under construction, and I believe a Rosewood is being planned. The country has sure come a long way from the land of the 3-star, cheap all-inclusive resort,” Garcia-Chacon said.
Another emerging trend Garcia-Chacon cited is a lack of truly capable third-party operators, despite what has seemed like a big move into the region from U.S.-based players.
“In the all-inclusive space, Playa was the leading player, and you could see how they franchised different flags with Marriott, Hilton, Hyatt and Wyndham,” Garcia-Chacon said. “They understood how the U.S. brands functioned but at the same time, could deal very effectively with the tour operators and wholesalers, both of which remain an important distribution channel for all-inclusives. However, with them being absorbed by Hyatt, there is real absence of capable operators.”
He added that some groups are trying to get into the space, but thinks it needs more specific expertise.
“We are also seeing something similar in the select-service space. You have some U.S.-based management groups entering the region but, while they have the relationship with the brands and the necessary systems, entering new markets has its challenges. It will take some time,” Garcia-Chacon said.
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