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The Nine Circles of CapEx Spreadsheet Hell, Part 2: Finding CapEx Paradise

12/13/2017



You wouldn’t consider using a spreadsheet to manage your contact list; manage depreciation schedules for fixed assets, or manage your guestroom inventory; you probably use software applications specifically designed for each of those functions.
 
Cost-effective CapEx planning and administration technologies are available as standalone systems, as part of an existing system (accounting, maintenance management, etc.), or agile integrated systems that can connect across multiple systems, organizations and levels.
 
Additionally, “Big Data” technology has enabled leveraging existing property level systems and process to provide a strong foundation for portfolio level CapEx planning, administration and execution. Increasingly, data can be shared across systems seamlessly, eliminating redundant data entry, and providing for greater accuracy, reliability and efficiency in CapEx planning, administration and execution.
 
Here are the seven steps to find CapEx Planning Paradise:
 
Systems Based Continuous Process
Implement an integrated CapEx planning and administration technology that supports continuous planning.

Commit to developing and maintaining a ten year forward looking CapEx plan for each of your hotel properties, and put processes in place to ensure that projects are entered and discussed on a regular basis throughout the year.
 
Planning Consistency
Support your continuous process with standards that help bring consistency to your planning. Define what is considered CapEx, and which non-CapEx expenditures you would also like to include in the planning process (e.g. large periodic maintenance expenses).  
 
Develop a dictionary of project categories, areas, names, and scope descriptions that supports consistent planning from year to year and hotel to hotel. Decide how budgets should be presented, and how budget add-ons should be calculated (e.g. design, tax, freight, fees, etc.).
 
Data Integrity
Design your system so that data resides in the appropriate system, and is available to the CapEx planning system as needed. That is, avoid replicating fixed asset data in the CapEx system if it is available in the maintenance management system or accounting system.
 
Transparency
Choose a system and process that provides transparency across linked systems and parties to the process.  Management staff at the property, regional and corporate office should have access to the same information as ownership, asset managers, auditors, etc.
 
Transparency is critical to any collaborative planning process.
 
Long-term View
Ensure that the system captures all large and/or recurring CapEx projects; for example renovations, fire alarms, chillers, boilers, roofs, exterior paint, etc. Scheduling these projects out ten years provides a strategic long term view of the properties capital needs, and supports effective portfolio planning by ownership.
 
Focused Review Process
Set up the CapEx system to support the review and approval process required by ownership, as well as providing for incremental review of individual projects, and focused review of “classes” of projects.  Rooms renovations require in depth review and planning; PTAC replacements do not.

CapEx approvals and administration should mirror this focused review. Senior management needs to review the scope of every renovation, but does not need to approve every replacement PTAC.
 
Portfolio Planning
The CapEx system and process should support portfolio level planning by both the management company and ownership, and should allow aggregation of purchasing and contracting across the portfolio.
 
Summary
Having a strong CapEx planning system and process in place will help ensure that capital funds are only invested at their highest and best use, and that you will never again need to visit The Nine Circles of CapEx Spreadsheet Hell.
 
Take action:
• Implement integrated systems
• Adopt a continuous planning process
• Insist on data accuracy, consistency, and efficiency
• Require a transparent process
• Take the long view
• Focus CapEx review and administration
• Negotiate best value through portfolio purchasing
About The Author
Thomas Riegelman

R-A Associates LLC


Tom combines an asset owner’s perspective of hospitality real estate with over 30 years of enterprise level management of real estate assets, development, planning, construction and facilities operations. His firm’s work is focused on creating and sustaining the long term value of hospitality real estate assets through thoughtful planning and design, efficient operations and strategic use of capital funds.

 
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