Where the Vacation Industry Is Renovating

To kick off its $20 million dollar renovation, the Rancho Valencia, a resort outside San Diego, sent out an announcement enumerating the impressive tally of changes guests can expect when it reopens this summer. On the list: renovated rooms, a second restaurant, updated meeting rooms -- plus the brand-new yoga pavilion. But there is one post-renovation plan that doesn't get a mention -- new, higher room rates.

Rancho Valencia says it will charge 15 to 40 percent more, but that the increased rates will take into account all the upgrades and new amenities. "Guests will be getting so much more value," says Oz Soykok, director of operations.

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If the vacation industry were a sports team, 2012 would be what the pundits call a rebuilding year. For travel companies, that reconstruction is literal, with nearly every corner of the industry now under assault by a barrage of saws and jackhammers. From 2010 to 2011, the number of hotels under renovation doubled, according to hospitality research firm Lodging Econometrics; it expects those numbers to continue to climb this year. Among the players are many of the biggest names in the business, like the Sheraton brand -- which is updating 60 or so North American hotels this year as part of a $5 billion initiative. And to hear the pros tell it, hotels are just one part of the industry overhaul: Most major airlines and cruise companies are going through their own billion-dollar nip-and-tuck phase, sprucing up planes and ships after years of neglect. "We're really just at the beginning," says Scott D. Berman, industry leader for hospitality and leisure at PwC.

This makeover madness, of course, has its roots in the aftermath of the recession. With travelers staying home and financing evaporating, most companies hunkered down and spent as little as possible in the postcrash years. But with the sector picking up, they are finally looking toward the future -- and realizing that they'll need something better than threadbare seats, not to mention something more than design and amenities frozen in 2008, to compete. And though few have the resources to splurge on big projects like launching a hotel brand or building a cruise ship, investing in an update of their current holdings is a manageable way to give travelers a taste of the new.

While vacationers will no doubt be thankful for the refresh, when's the last time you heard about a glitch-free renovation? Hotels, of course, cause some of the most noticeable disruptions for travelers -- especially because few shut down during construction (according to hotel research firm STR, about 65 percent of hotels under renovation at the end of 2011 stayed open during the project). But perhaps the bigger problem -- for hotels, as well as airlines and others -- is the possibility of coming off tone-deaf in a still struggling economy, say analysts. After all, most of the new upgrades are aimed at catering to the highest-end travelers, and some vacationers are already feeling irked by post-renovation rate hikes or new amenities they can't use unless they spring for a suite or a first-class ticket.

Cruise Lines

Just a couple of years ago, cruise lines were sinking as much as $1.4 billion into a single ship, but now, the old boats are where the action is. The industry is retrofitting old ships with many of the amenities developed for the newer vessels; recent additions include 3-D movie theaters, cupcake shops and stores hawking Apple products. Some are also squeezing in more cabins: The Celebrity Infinity recently added 60, bringing its total capacity up to 2,170 people, while Norwegian Cruise Lines added 58 new rooms -- including four deluxe suites with as much as 732 square feet each -- to the Norwegian Dawn.

Most experts agree that the ships need the work, but they also point out that many of the additions -- like specialty restaurants, where cruisers must pay a fee to eat -- are designed to pump up revenues. The most controversial aspect of the refurb effort, though, is the added cabins -- industry insiders even coined a term for the move: "cabin stuffing." Not only do the extra berths mean more people on the ship, but the new cabins, which are largely big-ticket suites, also reduce public spaces on the boat, says Dan Askin, of cruise-industry website CruiseCritic.com: "Cruisers don't like it at all." The lines counter that the areas were underutilized before and that the new layouts are easier for passengers to navigate. "It flows better now," says a Norwegian Cruise spokesperson of the changes to the Dawn.

Maybe so, but Debra Keough, who recently sailed on that ship, says she wasn't thrilled with the new location of the Dawn's Spinnaker Lounge, which was moved from prime real estate at the front of the ship to a rear deck. "I didn't even know it was there until the last day," says the Rockland, Mass., administrative assistant, who spent a week on the ship. Having booked a small cabin, she'd been on the lookout for other places to spend time, says Keough: "I would have loved to go there." (The cruise line says the reconfigured layout -- with the lounge in the aft -- is similar to that of its other ships.)

Airlines

Nowhere is the focus on the travel industry's version of the 1 percent more pronounced than with the airlines. Many have recently announced hefty investments in upgrades -- Delta Air Lines, for one, has pledged to spend $2 billion between now and 2013 -- and the vast majority of that money will be poured straight into those first few rows. At Delta, the changes include adding lie-flat seats in all international business-class flights, while American Airlines is giving its attention to the details, offering new tablet computers in premium cabins, for instance. Pampering high-end fliers is a no-brainer for airlines, says Henry Harteveldt, airline and travel analyst for Atmosphere Research Group; a business-class ticket typically brings in at least five times what an airline makes on an economy-class fare -- and a first-class ticket can bring in double that. "There's no more pretense on the part of airlines that economy will be comfortable," he says.

Still, the airlines' focus on boosting revenues may end up benefiting even fliers in the cheap seats. Both United Continental and Delta are providing additional premium-economy-seating options, which offer more room and perks such as early boarding for an extra fee. Then there are the little things that improve air time: entertainment systems and Wi-Fi, which are becoming more widely available, and overhead storage space, which United Continental plans to double on more than 150 planes.

Hotels

Mariola Weithers tried to do her homework before booking her family's stay at the capitol's Washington Suites Georgetown. The Frankfort, Ill., stay-at-home mom even called ahead to get parking details after spotting a notice on the hotel's website that a lobby renovation had prompted it to temporarily relocate its entrance. But there were a few things her research didn't turn up: The suites' check-in desk was now located in the breakfast area, the construction had spread to the hallways, and the "incredibly loud" banging and sawing started up at 9 a.m. "The pictures on the website give you absolutely no idea," she says. (The hotel says it provided information about the renovation, created a comfortable temporary lobby and tried to delay construction until guests had left for the day.)

Weithers isn't the only one waking up to a jackhammer serenade. Hotels spent about $3.7 billion on renovations last year, and will top that in 2012, says Bjorn Hanson, dean of New York University's hospitality school. In a better economy, more hotels would have the option to shut down during the changes, but few can afford that these days, forcing them to look for ways to make up for the ruckus. Strategies range from the basic -- informing guests of construction -- to offering occasional discounts.

The New York Helmsley Hotel is reopening as a Westin this summer, after staying open through a $65 million overhaul. The hotel is renovating in stages, shutting down a floor at a time, and is setting up a temporary gym while the fitness center is under the knife. Post-renovation, it will offer twice as many suites, gut-renovated rooms and a speedier Internet connection, says Westin global brand leader Brian Povinelli, adding that the hotel will also have a more modern look. Povinelli's vote for the first relic of the '80s that should get the ax? "The mirrors on the corridor ceiling."