Pricing a hotel renovation without knowing what my number does to their deal

Reading along on hotels and this is the clearest version of the question I've seen anyone ask, so I'll take a guess and someone can correct me.

The per-key number is connected to the total money they raised. Purchase price plus renovation plus fees plus a reserve equals the amount of equity and debt they lined up. If your number is $2.1M and they budgeted $1.44M, they're short $660k, and finding that later means either a capital call to their investors or a loan modification. Neither is easy, so the pressure lands on you.

The part I'd want in writing is who carries the risk if the brand rejects the reuse. That sounds like it belongs in the contract rather than in a conversation.

@juniper has the mechanism right, and there's a second piece. Their exit value is roughly the stabilized net income divided by a cap rate, so the renovation only pays if it lifts room rate enough to cover what it cost. A cheaper renovation that produces a hotel guests rate the same as before is worse than no renovation, because they spent $1.44M and moved nothing.

So what they need from you goes past a lower price. Show them both scopes with what each one does to the rooms a guest sees, and let them decide which bet they're making. Then get the brand's property improvement plan document in your hands before you sign anything, because that list is the thing that decides whether the reuse flies, not the sponsor's preference. Put the approval condition in your contract and name who pays for a rejected item.