Operational Issues

“Ownership rules govern who has control of the rooms and when. This is a key yield management issue, particularly for group hotels that need to know what the available block of rooms is at any given time. While not an insurmountable problem, I am not sure anyone knows how this will affect group bookings. Certainly, nobody has much experience with it.” – Mark Elbe, PKF Consulting

“The biggest operational challenge is making sure owners who choose to place their units in the management program will be treated equitably. The percentage of revenues the operator is willing to share with the unit owner and operation of the hotel to the highest standards are the strongest motivators in getting owners to put their units into the management program.” – Jack Kessler, lawyer and partner, Trump Las Olas Beach

“A condo-hotel operation requires a relatively significant tweak to the operator’s business model and strategic plan. Having a powerful yield management system in place is critical to the ongoing success of the hotel. Managing yield curves based on typical market consumption patterns, tempered against changing dynamics in the available inventory due to owner usage and participation options for the rental program will create a new, revolutionary type of yield management system. This system will be dedicated to managing the fair and equitable rotation of all units while still maximizing hotel ADR and occupancy in the short and long terms. You have to manage the total condo-hotel and hotel inventory to be sure that it is yielding the rates and availability to meet each of your business segments’ needs and is doing so in an efficient and effective manner.” – Mark Birtha, vice president, development, Edge Group, developers of the W Las Vegas Hotel, Casino and Residences

“Housekeeping is a major challenge. The time it takes to clean a 600 sq. ft. to 1,200-sq. ft. condo-hotel residence equipped with kitchenettes is significantly more than the traditional 300 sq. ft. to 400 sq. ft. hotel room.” – Neal Rubin, vice president, sales and marketing, InterContinental Resort & Residence Orlando at Plaza del Lago

“The biggest challenge in operations is maintaining consistent quality in the furnishings and décor of every unit. It is the biggest complaint guests have when staying in more mature resorts with condominiums.” – Bob van Bergen, general manager of the Ginn Company’s new Reunion Resort & Club

“The structure of the business should keep the operator well away from ownership issues by introducing a management company to handle the interaction with the condo unit owners. The operator should be left alone to get on with optimizing results.” – Philip Bacon, HVS Shared Ownership Services

“Properties developed 20 or 30 years ago with condo-hotel units often have to grade units and have a sliding scale for higher or lower quality units. Operators are attempting to control this better this time around by requiring reserves for replacement and consistent capital improvement programs. However, all hotels eventually need more capital improvement than the typical 4%-5% reserves will fund, resulting in a capital shortfall. At that point, the operator is at the mercy of the unit owners who will decide to fund capital expenditures out of pocket—or not.” – Daniel Peek, Regent Street

“You have to have enough rooms to satisfy the flag. You need enough meeting rooms to support a full-service restaurant. That can be done only if you have enough critical mass to hold the hotel to brand standards” - Michael Lerner, president and founder, MCZ Development, Chicago

“There are no differences in running a condo-hotel versus a luxury property. The key aspect to operating a condo-hotel is to devote personnel and time to communicating with owners, properly maintaining their units and maximizing their monthly revenue share. It becomes more challenging as the numbers of unit owners grow in relation to dispersing the revenues equally.” – Michael Spiers, director of sales, Cheeca Lodge & Spa, Islamorada, Florida

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