Full Definition
A Property Improvement Plan (PIP) is a list of renovations required by a hotel brand (Marriott, IHG, Hilton, etc.) to bring an acquired property up to current brand standards. When you buy a franchised hotel, the brand issues a PIP — typically covering room renovations, lobby upgrades, pool, fitness center, and technology systems. PIP costs are negotiable at purchase and should always be factored into acquisition price.
Example
Buyer acquires a 60-room Hampton Inn for $6M. IHG issues a PIP requiring $8,000/room in renovations = $480,000 total PIP cost. Buyer negotiates a $450,000 purchase price reduction to offset PIP. Effective acquisition cost: $6.03M all-in.
Why It Matters
Buyers who don't account for PIPs get hit with surprise capital requirements post-closing. Always request a PIP assessment before making an offer on a brand hotel. Factor PIP cost into your total acquisition basis and return model.