Capex planning
We understand the careful balancing act that needs to take place for a hotel’s investment plans to be successful.
Whether it is new build, change of use or acquisition and / or brand change, we rigorously examine all proposed expenditure, to eliminate waste and optimise the timing.
The requirement for capital expenditure is evaluated through the following tools.
- A critical assessment of whether or not to apply any capital to the issue
- Assessment of the timing of any spend including any disruption to existing cash flows
- An assessment as to whether there is a later alternative use of the assets
- Cost/benefit analysis
- Market movement and conditions review
- Flexibility to future changes
- Value creation analysis
A capital plan with supporting cash flows and clear purpose statements is prepared which segments expenditure into three categories.
- Defensive - aimed at maintaining market share and is a response to market trends
- Strategic - has as its goal a repositioning of the asset in part or in whole, for example through a rebranding or through the conversion of part or all to an alternative use.
- Expansionary - aimed at adding capacity e.g. through additional rooms, additional leisure facilities etc.
CML works closely with its owners to ensure that comprehensive estimates of the future benefits to be expected from proposed capital expenditure are made. Capital plans that indicate positive value expectations are further tested using sensitivity analysis to enable our hotel owners to make better informed, clear and quick decisions on capturing the value of opportunities identified by us.
Our hotel owners are given a recommended plan with cost, timings, returns, risks and priorities to review before the start of each financial year.
Once the detail is agreed, the hotel owner has the option of handling the design, tendering and project management themselves, through a third party or by harnessing our skills and extensive experience.
