Holiday Inn's ultimatum to shabby hotels: Renovate or the Holiday's over

For Holiday Inn franchise owners, 2010 is starting to look a little bleak. At its annual meeting on Thursday, the chain's owner, Intercontinental Hotels Group (IHG), told its American franchisees that, recession or no, they need to renovate. At the very least, every outlet has to install new lighting and signs, renovate its lobby, and buy new pillows, towels, and bedclothes. For older hotels, the changes will be more extensive.

Most of Holiday Inn's 3,300 hotels have already undergone these changes, but the owners of 300 have been dragging their feet. One large reason for their procrastination arises from the cost: The $150,000 to $250,000 renovations have to be financed by the individual outlets. In today's tight credit market, many franchisees are having a hard time raising the money.