Tracking keeps owner use, rentals in line

Hotel & Motel Management, July 19, 2004 by Dennis Blank

National Report--As more condo hotel properties come on line, managers are faced with new ground rules that give options for splitting revenue and expenses but have built-in flexibility on such issues as damage, housekeeping and marketing.

"It's a win-win situation," said Rod Dann, executive v.p. and director of operations for Boykin Management in Cleveland, which just opened a 92-unit condo hotel, Pink Shell Beach Resort & Spa in Fort Myers Beach, Fla. "Attracting [hotel development] money has been difficult. This is a way to continue to develop hotels with other people's money."

The condo hotel is a hybrid between a condo and hotel timeshare, he said. In a condo hotel, owners don't have the usual worry of closing up the unit, cleaning, turning off utilities and security when they leave.

From the condo owner's point of view, the attrition on their investment is fast--in some cases by as much as 40 percent in less than 12 months--and they are earning revenue from the rental of their units.

Because of the importance of tracking revenue, reporting expenses and making sure that units are cycled uniformly without giving preferential treatment, many properties have started using software. The Pink Shell uses Springer-Miller Systems software to track the revenue streams and reports it to owners monthly.

"One of the tricky parts of it is to allocate occupancies fairly among the unit owners, and Springer-Miller allows us to do that," Dann said.

For the most part, the guestroom revenues, which range from $198 to $540 a day at the Pink Shell, are divided 50-50. The hotel takes responsibility for utilities, maintenance and housekeeping, and fees of about 8 percent are taken from the unit owners' shares for marketing.

Usually, the amount of time and season owners can stay in their units also is dictated. At the Pink Shell, owners can use their unit for 28 days and only 14 days during the January to April peak tourist season. Investments at that resort range from $280,000 up to $740,000 for a two-bedroom unit.

Mark Ellert, president of Interlink Asset Group, developer of two condo hotels opening in Winter Park, Fla., and Fort Lauderdale, Fla., offers 20 to 30 different rental programs.

"The cost of living in a condo hotel is clearly higher because the level of services is higher," Ellert said. "You have to generate revenues to defray those costs so owners don't end up with costs that are unacceptable to them."

At the same time, there are some owners who want to use their units one or two months a year and others who just want a weekend beach house, Ellert said.

At the Trump International Sonesta Beach Resort in Sunny Isles Beach, Fla., unit owners can use their condos three weeks a year and are charged a discounted rate for more days. Rates start at $195 a day and go to $1,000 for a two-bedroom unit. According to Alan Sonnabend, v.p. and g.m., the hotel absorbs marketing and routine maintenance costs.

The Sunriver Resort in Sunriver, Ore., does not restrict owners' length of stays in its 143 condo units, but does ask for 30 days notice and uses two different formulas for sharing revenue. One is a 50-50 revenue split in which the owner is not charged for cleaning and maintenance. The other is 65-35 in favor of the condo owner, who is assessed monthly management and housekeeping fees.

While in most cases, damaged furniture is the responsibility of the condo owner, the guest who caused the damage usually is charged.

"If it becomes unacceptable, there have been times that we have had to remove them from the rental program," said Scott Morris, g.m.

That is different from many other properties.

"If someone kicks in the TV, it is [the condo owner's responsibility] to get it fixed," Dann said. "Also in our case, there is a fee for maid service on a daily rate, and they would have to determine if they want it."

One segment of the hotel industry that appears to be perfect for the condo-hotel concept is the extended-stay sector.

Homewood Suites by Hilton has one condo-hotel property open in Montreal and is planning another one in Florida.

"There are a lot of similarities and a lot of synergies, especially if [developers] plan for the mix from the get-go," said Frank Saitta, senior director of hotel performance support for Homewood Suites.

A traditional hotel guest should not notice differences between condo hotels and extended-stay hotels, Saitta said.

"The number of check-ins and check-outs is minimal and both concepts have a very residential feel," he said.

In Homewood's case, a condo owner gets to use the unit for 60 days. There is one owner per condo.

"What matters to us is the amount of condos available in the hotel rental pool," Saitta said. "In a perfect world, we'd like every condo to be in the hotel rental pool."

The brand uses Hilton Corp.'s property-management system, and Saitta said adjusting the level of inventory at a condo hotel reflects the same mentality needed at an extended-stay hotel. Condo hotels and extended-stay hotels use the same staffing model, so there is no shift in thinking.