Hotel Business Review Archives

So often I hear from my colleagues in the hospitality industry, what is the value proposition in owning a timeshare. The question is raised on both sides of the coin. What is the value in it for the timeshare owner and what is the value in it for the developer and/or manager of a timeshare resort.

Many of the new condo hotel projects that you have been hearing and reading about are nearing completion and preparing to open for business. The focus of our attention and analysis must now shift from the philosophical foundation of the condo hotel model to the more pressing concern of how to operate the asset in a manner that is consistent with the hopes and expectations of the parties.

Condo-hotels, also known as condotels and apartotels, are taking the hotel industry by storm. Initially made popular in the Miami area throughout the 1980s, these residences are back in a big way, allowing biggest names in luxury hotel brands to create a whole new real estate market. By uniting the public's desire to invest in real estate with the travel industry's quest for new properties, the condo hotel has reinvigorated the hotel construction business, altering the skylines of gateway cities from San Francisco and Las Vegas to Boston and New York.

"The trend has greatly increased in the past year or so and the absence of available financing has caused it." - Charles Reiss, a pioneer in the business who started working on condo hotel projects several years ago as part of the Trump Organization, also previously President and COO of the Sunshine Group. As an active advisor to clients in the hotel debt and equity capital markets, I find the above statement particularly troublesome. It is no secret that hotel capital, both debt and equity is abundant in part due to relatively healthy lodging fundamentals, drastically reduced hotel loan delinquencies, positive forecasted investment returns especially relative to other commercial real estate sectors and potentially a longer hotel investment cycle due to predicted lower supply growth. If creative financing or a lack of alternate financing is the impetus behind the condo-hotel craze, this is pause for concern in light of the superabundance of capital in the market. Before reading further, it should be noted that condo-hotels can and do work in certain circumstances. Such circumstances are few and far between to warrant the type of attention that has been droned on this niche within the lodging sector.

It is hardly surprising buyers and media alike are confused by the different models available to guests for vacations when a good part of the industry is, too. Which makes the two upbeat and well-attended IMN symposiums in Orlando between April 18 and 20 most timely. So what are these alternatives? Let's define terms first...

Imagine a real estate scenario where investors enjoy higher margins, developers plus sales and marketing teams enjoy decreased costs, managers enjoy streamlined operations, buyers enjoy the very real perception of getting more than they paid for, everything is legal, and everyone is happy. Welcome to the world of fractional ownership.

Just as hotels operate more smoothly with focused guest communication, a private residence club must also provide consistent, informative communication to its homeowners. Homeowners have a stake in the success of the property from both a resort and a real estate perspective; anticipating and addressing their concerns is crucial to productive hotel-homeowner relationships. The relationship between management and residence owners at fractional private residence clubs is a complex one-it requires special attention to issues that are new to most hoteliers. With this in mind, here are the important things to consider when communicating with residence owners:

In an ideal relationship, you want your managers and management company to take credit for what they have done right and take responsibility and action when something isn't working. You also must be able to measure the results of the management company's service and, when appropriate, your general manager's performance. Just as you hold any employee accountable, you must hold a management company accountable, which will help your organization run more effectively and efficiently.

In today's rapidly changing and highly competitive hospitality industry, there are many different roads that can lead top managers to new career heights and greater achievements. One increasingly popular route paving the way to expanded personal growth and professional success is via fractional resort management. One of the fastest growing and most fascinating segments of the lodging industry is shared-ownership vacation resorts, including fractional interest, private residence clubs and destination clubs. According to the latest figures released by Ragatz Associates, this segment grew 8.3 percent in 2007 with sales volume estimated at $2.3 billion -- this despite the dramatic decrease in the country's overall residential resort industry.

Most of us eat three meals a day, 365 days a year for a total of 1,095 dining experiences. Surely some of these should be memorable, and that's a key goal for managers at fractional interest resorts. Restaurants and food service are without a doubt the most competitive aspects of the fiercely spirited luxury resort hotel industry. Top-notch hotels and resorts have started recognizing this growing trend and are now being pushed to raise the bar on culinary services still higher as a new generation of "foodies" want more on their vacation menus than just room service and all-you-can-eat brunch buffets.

Successful fractional ownership projects today are often characterized by authenticity, enrichment, and sustainability more so than just "luxury" - which is clearly an overused term. With price points ranging from $100K to one million dollars, they will most likely be purchased by more of the "super affluent." But it is more than just income and assets. It's also about inner life and their propensity to indulge in a preferred lifestyle that their wealth allows.

In today's tough economy, customer value and quality service are everything in the luxury resort category. As the industry wades deeper into an uncertain 2009, some fractional resort and luxury hotel developers and operators look startlingly like deer caught in the headlights -- paralyzed by doom-and-gloom news and declining sales reports. Yet high-end property owners and mangers should know that luxury is, and always has been, a cyclical business. So as we wait out this market downturn, let's not hastily cut concierge programs and guest service personnel in a panic to balance the books.

In the past five years, the fractional ownership buzz has been amplified within the luxury space -- and throughout popular culture as well (nee Hard Rock "condotels"). The result of this attention? Resort owners and developers around the world are tapping into the fractional ownership trend. By all indications, there's a paradigm shift occurring away from hotel rooms and more toward luxury vacation lifestyle experiences. Consequently, these new ultra-luxe fractional resorts are catching the eye of developers and investors alike who want to be well positioned when the economy regains its strong footing and luxury consumers start flexing their buying power again.

There is no doubt that travelers today have become more sophisticated, more demanding and, ironically, more value-conscious. They have more disposable wealth than ever before, but are finding that their time has become their most valuable asset. Those who can afford second, third or fourth homes are now realizing that the hassles of maintaining those homes are far outweighing the benefits. Furthermore, these travelers are seeking new experiences and require flexibility when it comes to planning not only their business trips, but also their leisure time. For this reason, travelers are not necessarily focused on the cost of a travel experience, but more on the value of it. To capitalize on this trend, a variety of travel products in recent years have flooded the market. Residence clubs, condo-hotels, timeshares, fractional resorts, and destination clubs are all elements of a booming phenomenon that is having a strong impact on the luxury hotel and travel industries.

The trend over the past few years has been for more colleges and universities to add lodging products to their campus community. Some of these are single use facilities dedicated to executive education and weekend MBAs. Many are mixed use facilities that cater to all of the university departments and administration. Many of the departments on campus will have lodging and meeting needs. It is intended that these facilities serve as the front door and the living room of the campus. One of the keys to the success of these lodging facilities is that the operator fully embraces the philosophy and mission of the campus.