Renovate, Reposition or Reset?
Issue 04 | August 2026
A periodic publication by 3AM Hospitality Consultants.
I once joined a newly opened hotel as its fourth General Manager—in its third month of operation.
The entire executive committee had already been replaced.
The owner was determined to offer the lowest room rate in the hotel’s star category. Although it was the newest hotel in the market, price quickly became its defining feature. The market decided that the hotel was cheap, and we began attracting the clientele that came with that perception.
But price was not the original problem.
The hotel had opened with more rooms than the location could absorb. During development, the management company had recommended less than half the inventory eventually built.
The owner was a visionary. He saw what the location could become and built for the market he believed would eventually emerge. In many ways, he was right.
The problem was timing.
The hotel opened before demand had caught up with the scale of the investment. A visionary can be right about the destination and still underestimate the cost of arriving too early.
Where possible, preserve the option to expand after demand proves itself rather than committing the entire investment to the forecast.
When the expected demand failed to appear immediately, the natural response was to lower the price. When that did not solve the problem, management was changed.
This happens more often than owners may care to admit.
When a hotel misses its numbers, the first instruction is often to reduce rates. The second is to replace the Director of Sales—or, in this case, almost the entire leadership team.
Sometimes the people are the problem. But changing the people cannot correct an investment assumption, create demand that does not yet exist or remove rooms that have already been built.
Discounting Was Becoming the Positioning
My first priority was to stop the promotional rate from defining the hotel.
I did not eliminate discounting. We still needed tactical promotions while the location matured. But I negotiated a cap on the number of promotional room nights.
This created room to build a proper business.
We focused first on dependable base business. Then we pursued higher-yielding segments and tried to steal the cream from our competitors—not simply fill more rooms at any price.
We placed greater emphasis on the club floor, direct digital demand and the guests and accounts that could become part of the hotel’s future. Food and beverage brought people into the property and helped counter the perception that a low room rate meant a low-quality hotel. Weddings and MICE generated guestrooms, food and beverage revenue and greater visibility.
Gradually, the business mix improved. RevPAR increased. Profit followed.
Image from Capella Bangkok (www.capellahotels.com)
And profits, inevitably, hide a lot of sins.
We eventually reached the targeted numbers. Operationally, the turnaround worked. But improved performance did not change the original scale, timing or financing of the investment.
A good management team can improve earning power and reduce the damage. It cannot retrospectively make those original decisions optimal.
Even exceptional management has limited room to manoeuvre when the underlying economics are unsound. A sound business, by contrast, can often withstand merely competent management.
Operational success and investment success are related. They are not the same.
Some Problems Could Be Managed Away. Others Could Not.
The commercial problems were only part of the story.
The hotel also had ordinary opening defects and more serious problems involving air-conditioning, plumbing and fire-and-life-safety systems.
Some could be resolved by our maintenance team through persistent defect rectification, better commissioning and tighter preventive maintenance. Others required additional capital.
We therefore worked on two fronts.
Commercially, we rebuilt the business mix and stopped the lowest rate from becoming the hotel’s identity.
Operationally, we fixed what the team could and made the case for capital where the building itself required intervention.
Some mistakes were managed away. Some were paid for twice—once during construction and again through corrective capital expenditure. Building too many rooms for an immature location could not be reversed at any sensible cost. That problem needed time.
This experience shaped how I now look at underperforming hotels.
Before replacing another executive, launching another promotion or approving a renovation, an owner needs to answer two simple questions:
What is the problem?
Where is the problem?
Start With the Business, Not the Prescription
For an existing hotel, I begin with last year’s performance and the growth assumed in the current business plan.
Then I look at the business by market segment.
Room nights come first. Which segments are ahead, and which are behind?
Has the hotel lost demand, or has the business shifted into a different segment?
Then I look at average rate. Are we gaining volume only because we have sacrificed price?
Finally, I look at room revenue to understand the combined effect.
RevPAR remains a useful measure for the hotel as a whole, but it does not tell us where the underlying problem sits. The segment analysis does.
Image from Capella Bangkok (www.capellahotels.com)
This is not merely an exercise in explaining a budget variance. The budget itself may be wrong. Last year may also be the wrong reference point if the market or competitive environment has changed.
The purpose is not to defend the plan. It is to understand the business.
Only then can we decide whether the hotel needs to renovate, reposition or reset.
Reset: Improve the Promise and the Machinery Behind It
A reset is usually the right starting point when the market opportunity still exists and the physical hotel remains broadly competitive, but the operation is not capturing that opportunity.
The problem may lie in pricing, sales discipline, leadership, service consistency, maintenance, productivity or the quality of execution.
At another hotel, we relaunched the property under refreshed branding and clarified what it should represent. But the reset went far beyond changing its visual identity.
The central idea was discovery: helping guests experience the destination from a new perspective.
We translated that idea into coffee, art, scent, sound, sleep and welcome experiences that allowed guests to see the destination differently. The brand was no longer confined to a logo or marketing language. It became part of the stay.
At the same time, we improved the machinery behind the experience. Productivity increased, labour, energy and food costs were reduced, and guest engagement improved.
The guest-facing relaunch and operational improvements had to happen together. A new promise without better delivery would have been cosmetic. Better efficiency without a more compelling experience would have produced savings but little additional reason to choose the hotel.
A reset works when the promise to the guest and the machinery behind it improve at the same time.
This does not mean protecting weak leadership. If the evidence shows that the General Manager or Director of Sales cannot deliver, a change may be necessary.
But the change should follow the diagnosis.
The new person should not inherit the same unrealistic plan, uncontrolled discounting and structural problems—and then be blamed when the result remains unchanged.
Reposition: Build on a Natural Advantage
A hotel may need to reposition when the market it was designed to serve no longer exists in sufficient depth—or when a better opportunity has been demonstrated.
But repositioning can destroy value when an owner abandons a naturally advantaged market in pursuit of a segment that appears more attractive.
One hotel I managed in Singapore had a location that made it a natural choice for travellers from one of the city’s major overseas source markets. The surrounding neighbourhood was familiar to them, shopping was convenient, and the hotel offered reasonable access to the airport and the rest of the city.
Wholesale travellers from that market represented a substantial share of the hotel’s business.
The owner wanted to replace some of this volume with airline crew. The instinct was understandable. Crew business appeared to offer dependable, recurring room nights.
Image from Capella Bangkok (www.capellahotels.com)
There was one significant problem: without renovated guestrooms, the crews would not stay.
The hotel was already performing well, yet it was considering sacrificing proven demand to pursue a segment the existing product could not satisfy.
In hindsight, the better decision before renovation would have been to protect the hotel’s naturally advantaged business and test its pricing power.
Could we increase rates while retaining most of the demand? How much volume would we lose? Would the higher rate more than compensate for the lost room nights?
That evidence would have told us whether the existing business was more valuable than it appeared.
When a hotel is already performing well, test whether you can charge more before deciding that you need different guests.
The wider investment outcome confirmed the strength of that natural advantage. Held for more than 40 years, the hotel became an important source of cash for the company and repaid the original investment many times over. After renovation and repositioning, an exceptional offer eventually justified its sale.
The lesson is not that the hotel should never have evolved. It is that evolution should build on the natural advantage that made the asset valuable in the first place.
New segments should be developed incrementally. Proven business should not be displaced until replacement demand has been validated and the hotel can deliver the product those guests expect.
A repositioning should enhance a naturally advantaged business—not discard the source of its success.
Renovate: Change Behaviour, Not Merely Appearance
Renovation becomes necessary when the physical product is preventing the hotel from satisfying guests, competing effectively or achieving the rate required by its positioning.
But a renovation should do more than make a space look newer.
At another hotel, the owner’s favourite outlet was a nostalgic bar with a loyal ballroom-dancing clientele. It had atmosphere, regular customers and a clear identity.
On the surface, it appeared successful.
But the guests were passionate about dancing, not drinking. Many purchased only the minimum required for entry and spent little beyond that.
The concept was attracting exactly the audience it had been designed for. The problem was that it also encouraged spending behaviour that could not support the economics of the outlet.
I persuaded the owner to renovate it as a contemporary craft-cocktail bar built around local ingredients and cocktails with stories.
The renovation changed more than the appearance. It broadened the potential clientele and gave guests more reasons to visit, explore and spend.
Average spend and customer traffic increased. The outlet moved from break-even to healthy profitability, strengthened its reputation and became a destination for the surrounding neighbourhood.
A repositioning should enhance a naturally advantaged business—not discard the source of its success.
Guest feedback should guide renovation decisions, but that does not mean reacting to whoever complains the loudest.
Hotels already collect large amounts of guest feedback. The opportunity is to determine which parts of the experience have the greatest influence on overall satisfaction—and connect them, where possible, with commercial performance.
If room condition, bathrooms, noise or unreliable air-conditioning consistently drive dissatisfaction, renovation may be justified.
If cleanliness, responsiveness or service consistency has the greater impact, renovating the guestrooms may be an expensive way of avoiding an operational problem.
Do not renovate what guests merely mention. Fix what actually drives dissatisfaction—and determine whether correcting it will improve pricing power, demand, profitability or long-term asset value.
The Answer Is Often More Than One
Renovate, reposition and reset are not mutually exclusive.
A reset may reveal the need for targeted capital. Renovation may enable repositioning. Repositioning will fail if operations cannot deliver the new promise.
Context matters.
The right answer depends on the market, competitive set, lifecycle of the hotel, ownership objectives, available capital and expected return from each intervention.
My normal sequence is to test the reset first when meaningful improvement can be achieved through management, pricing, service or operating discipline.
Image from Capella Bangkok (www.capellahotels.com)
Reposition when the intended market cannot support the hotel or a better opportunity has been demonstrated.
Renovate when the physical product prevents the chosen strategy from succeeding.
But this is a starting point, not a rigid formula.
The principle is simpler:
Diagnose before prescribing.
Begin with the intervention most likely to produce a durable improvement in earning power relative to the time, capital and risk involved.
The Cheapest Time to Diagnose
The cheapest time to diagnose a hotel is before the capital becomes irreversible.
Looking back, the most valuable intervention at the first hotel would have happened before construction.
The owner should have commissioned a genuinely independent feasibility study and required the investment assumptions—including his own—to survive serious challenge before proceeding. The management company’s commercial advice should also have been treated as an important operational reality check.
Gut feel has value. Many great hotels begin with an owner seeing an opportunity that spreadsheets cannot fully capture.
But gut feel should begin the idea. It should not approve the investment on its own.
A feasibility study should test whether the market can support the proposed number of rooms, positioning, rates, business mix and expected ramp-up—and whether the likely return justifies the capital at risk.
The financial model may be mathematically correct while the assumptions inside it remain commercially unrealistic.
That is why the study should be challenged by an experienced hotelier who understands what the operation would have to deliver for those numbers to become real.
A study should inform judgment, not replace it. Its purpose is to make the investment case withstand evidence, contrary views and realistic downside scenarios before the capital is committed.
Once the hotel has been built, management can improve earning power. Additional capital can repair parts of the building. Time may allow the market to catch up.
None of these can cheaply reverse an investment conceived at the wrong scale, built at the wrong time or financed without sufficient room for error.
When a hotel underperforms, owners understandably feel pressure to act. Reducing rates, changing management or approving a renovation all look decisive.
Any of them may be correct.
But the most expensive response to hotel underperformance is solving the wrong problem well.
About the Author
Paolo Campillo is Managing Partner of 3AM Hospitality Consulting, providing independent owner-side advisory for hotels, resorts and mixed-use developments.
Drawing on more than 30 years of operating experience across Asia, he helps owners create and improve hospitality assets that work operationally, commercially and over time.
Is Your Hotel Underperforming?
Before committing further capital—or replacing another senior executive—an independent diagnostic can establish whether the hotel primarily needs renovation, repositioning or an operational reset.
For an independent owner-side perspective, contact 3AM Hospitality Consulting.
www.3am.com.ph
Disclaimer
This article is provided for general educational purposes. Every hotel and capital decision should be evaluated according to its particular market, objectives, assumptions and risks.
