Condominium hotels and resorts, advice for investors (Part 1)

The term condominium hotel is best summed up by this description: The accommodation units are individually owned but they are under a management umbrella and marketed as a unified group and operated as a hotel. Add on some common area facilities such as a spa, a front desk, restaurants and bars and administrative areas, with in-room dinning, property upkeep and maintenance .

All very simple really, or is it? What makes a condo hotel unit such a complicated piece of real estate  to purchase and be owned? The following commentary is not unheard of. Not what you will hear from a real estate agent!

The most important aspect to consider is the relationship between the players, i.e., the developer and real estate agent who are hell-bent on selling the units, the rental management operator or hotel operator who is concerned the buyers are being misinformed with hugely overstated revenue projections by the developer’s sales team (revenues they will never be able to achieve), the management of the common areas (strata) who may or may not be the rental or hotel operator who is concerned that the owners are not fully aware of all the ongoing fees and cost involved in looking after the property as perhaps these fine details have not been presented in the purchase contracts (a classic response to any one who asks is “they are being worked out right now”) and the owners, the buyers who buy into it.

First up the buyers (the owners ) review all those glossy sales packaging, great pictures, revenue projections in your face that have little or no realistic market research behind them, which may or may not resemble the actual projections the management company presented to the developer, who package it all very well of course with fine print that is basically meaningless. Your home in paradise!

Then owners end up being peeved off with the management company who have to bear the brunt of the owners’ frustrations as they gradually find out that their net revenue, after all the commissions and operating costs, in no way cover all of the ongoing costs, and that includes strata fees to cover the management and upkeep of the common areas and the like, all the general repairs and maintenance, taxes, etc. Especially so after deducting the rental operator’s fees that could be near 50% of revenue.

So as condo hotel ownership gets to be a bit of a financial let down for the owners, the pressure gets tight, everyone is trying to reduce costs and maximize revenue. So the owner decides it is about time to take a trip and have a bit of a break, and experience his second home and see what is actually going on. (See Part 2 of this most interesting topic!)

Boutique hotel development room design considerations

In designing and planning a boutique hotel room basic design elements take center stage at the commencement of the development process..

Jumping from the planning of the guestroom floor with the slab and design configuration options, defining the room mix is at its core based on the market study, or the basic understanding of what market the hotel is to attract.

The guestroom program defines what bay within the architectural design will be allocated to king, queen and twin bedded rooms, the variety and number of junior and king suites, service areas, and what connects to what directly. The design team, and that includes the interior designer at the outset, studies a wide range of options and room layouts paying particular attention to the optimum width of the architectural bays, and how to use them to best advantage.

Over the years it has been ascertained that a width of a hotel bay and the associated net width of the interior of a guestroom in a single bay, be at a minimum 4.1m for an upscale property. This permits a major advantage in that it allows the king bed to be positioned against the bathroom wall and not as one usually finds in a standard hotel room on the side of the wall. It should be noted there is not that much advantage in a wider width unless it reaches 4.9m. Then a lounge or/and work area can be placed on the opposite wall to that of the bed, and allows for a 5-fixture bathroom.

The market definition for boutique hotel usually arrives at a consensus that 75% of the rooms should have king beds with additional keys being allocated to single or larger suites and queen queen rooms. In boutique hotels  the rooms are usually somewhat smaller than the norm given the fact many are renovations of old hotels that owners have  acquired at an attractive price and cost-effectively remodeled, the role of the design team becomes even more important in applying techniques for combining the guest activity zones within a room in a way that increases the flexibility of use.

To fit the market position as a true boutique hotel, projects need to create elements that distinguish themselves from being just a traditionally renovated room, adding flair and humor to give distinction from just a remodeled hotel room.

Nowhere in the room is the planning and design more important than in the guest bathroom;  to maximize the efficiency of design, bathrooms are positioned in pairs, together with the pairing of two guests rooms back to back.

Usually total guestroom area allocation at a minimum for an upscale property equates to about 24 square meters for the living area before space is allocated to a closet and an entry area, with a 1.8m by 2.8 meter bathroom. Total guestroom of 36 meters square at a bare minimum.

Summing up, 3 key areas need addressing, the net width of the inside walls, the length and the size and shape of the bathrooms. However it is not so much the size, it is how that size is utilized that holds the key to a well designed market-focused boutique hotel room.

Larger and more sexy bathrooms for boutique style properties are obviously more important than in a 3-star branded hotel at an airport. Guest bathrooms with compartmentalized toilet, separate shower stall with spa style shower heads, 2 sinks, and a tub are becoming more the norm and guests are sure to measure the boutique hotel experience to what  they enjoy in their homes. Obviously exceptional good use of space by the interior design team for each square foot available can overcome in the guests mind any limitation of size of the living area and the bathroom.

However the space is utilized, the bottom line is that innovation and artistic expression need to go hand in hand with practicality, designs that combine good flexible function and comfort within an established budget based on the market positioning, with technology aspects within the room that are easy to use.

For more advice in the design of  boutique hotels contact Turner Lodging Co; remember, a hotel design team is only as good as the hotelier who guides and inspires their creativity, helping them to integrate operational efficiency and day to day functionality into the design as only a hotelier could.

Resort hotel development and what is involved

Developing a hotel? New to resort hotel development? As you figure out where to start and as you contemplate the results of the hotel feasibility study, here are a list of basic issues you need to have in place.

If you have not had a market study done by the way get one done, at the very least this should be done by a professional, not the local real estate agent down the road who sold you this lot with the line ‘great spot to build a resort’.

Get you team together. Yes I mention this as it is not uncommon for those who are inexperienced to not realize the amount of team members which are required to kickoff a successful hotel project. Architect, surveyor, builders and engineers,  interior designer, a hotel consultant to assist you with general input and management and brands options, landscape specialist,  someone experienced in kitchen design plans (not the supplier on his own),  special systems experts in communication, security and the like.

Get your permits in order. Environmental and local municipal issues.

Get your finance in order; realize that you need cash to get this off the ground.

Get your development budget tied down and in order, and get advice on this from experts. Realize that base building costs are a smaller than you expect % of the total build out costs.

Get your management team decided on and contracted? Who will manage this hotel?

Educate yourself, get advice, and if all of the above are in place you will have a good chance of success.

So build out is occurring now, what do you have to do to open a hotel?

Management have to figure out how to overcome numerous challenges along the way to opening.

With conflicting interests from numerous parties it is an interesting and challenging profession.

Consider the balancing act!

Your client and or owner who happens to be a local real estate developer wants to sit in the main restaurant to host his potential real estate clients a week after the chef is hired while construction in the kitchen is ongoing, the financier and developer are eager to get guests in the door before the hotel is completed, the hired team needs to be educated, trained, trained and trained again.

Where will the staff and management team come from? How to get the local community  onside? Will the operating concepts and the pricing strategy actually work? Are we on budget with pre-opening and construction costs? Where will we buy our products and equipment? How secure and safe will this place be? What is our image and marketing position? Where will our guests come from? Who will oversee the defects management of construction/ Will we need to take over the property from construction before defects are rectified/ Can the chef actually cook as the owner appointed him/her and we didn’t test his/her skills during the recruitment drive? Will the staff housing be ready? What will be our environmental friendly practices? How do I keep the owners happy. How do I now persuade head office or/and the owner the 1st years budget was too optimistic?

One can go on and on.

Successful hotel development and opening management requires a feel for where one is at as the circumstances change daily, the uncanny ability to figure out the timing issues and kind of worm one’s way through all the obstacles.

Summary

As your resort hotel management team, business adviser or development consultant we will help you avoid all the opening pitfalls. Proven and tested, our experience in opening or re-launching resort hotels is extensive and almost all took place in ‘hardship’ isolated locations where one has to think outside of the box.

 

Hotel market and feasibility studies, the basics

So you want to build a hotel. Or you think you want to. Questions among many that need answering are ‘will this project make financial sense giving me adequate returns; will my concept work; do I have adequate funds for this concept to work; how and will we be able to attract finance for this project of mine to work?’

Factors need assessing, among many other are ‘is my land suitable for this concept or idea to work? How do I get out once I am in? Does this idea suit my real estate sales program? Do I need a management company? Do I need a market study? (Yes) Will a management company invest in this? (NO, even if one would you do not want to do this as it would require some very unattractive clauses in any management contract) How do I attract a suitable management company and negotiate a good deal with them? (Get advice at the very beginning of your project on this one)’

A comment on concession land in Costa Rica, firstly find yourself an honest realtor and a good lawyer (yes there are a few realtors around you could trust) and ask them for their opinions. There are many articles by reputable real estate brokers commenting on the risks involved in developing, owning a hotel or creating a condo hotel structure on concession land in Costa Rica.

Feasibility Studies should have the following content.

  • An overview of the project, defined as what we call an Executive Summary
  • The project definition that is the number and market mix of rooms, what common facilities, what size and to what standard, proposed operating concepts and additional amenities like shops, entertainment areas and the like.
  • An overview of the local area and the region as related to this project.
  • An analysis of the lodging market as applicable to market drivers and growth or non growth patterns; what additional supply in demand and what other properties are in the pipeline to change demand characteristics.
  • An analysis of present occupancy and average room rate achieved within the local competition with a market mix study.
  • Development costs, that is all development costs and not just the build out costs.
  • 10 year financial projections with assumptions on revenue and costs with support documentation on pricing assumptions and the assumed markets that would drive revenues.
  • Conclusion with a ROI statement, supported by a realistic assessment of the attractiveness of such a project for the owner taking into account their unique circumstances.

That should give you an honest assessment of whether you have any chance to make this project work.

All too often I have requests to comment on the suitability of a piece of land to built this, or that, to comment on the attractiveness of this area as compared to others in this region for the project, to propose a hotel concept on this or that all without any formal contract agreement.

We do not give free advice, what we do deliver though are cost-effective reports along the lines as that detailed above that will save you substantial amounts of money in the long run if you do not go ahead with a project that is deemed too risky, and many thousands if you do go ahead as the advice we provide will put you on the correct road map for long-term success.

The minimum you will require before you get serious with any proposed project is a local market study to initially ascertain the suitability of your project in the proposed site and location, and this is what we can provide.

Value-added design in hotel development

Hotel development critical processes: value design, value engineering, value life cycle, what do they mean?

Value-added design is a process through the stages of the use of space program.

A project’s viability can be truly reflected after profound but minor economies. In the ‘Art of the Deal’ developer Donald Trump cited using three hinges on each ball room door, instead of four, thereby saving 25% of  installation and material costs.

The process, although based around common sense, requires an experienced development team, who can justify the use of all space as it relates to the unique market concept of the hotel.

Firstly they need to answer the questions, ‘is the space essential?’ and ‘how best do we use it?’

Value engineering involves the architects, engineers, manufacturers presenting a cost-benefit-analysis of the maintenance, reliability, durability of all major materials, systems and equipment being considered. Obvious aspects are hot water systems, elevators, air conditioning, communications, floor finishes, and kitchen equipment; this process also involves a life-cycle cost analysis estimating energy replacement and maintenance costs. The developer is then educated in the selection process. This takes time and perseverance, but the long-term viability of the hotel is often defined at this stage. Operating profits for years to come are defined, and a project manager experienced in the hotel field is an invaluable asset to this process.

Building safety codes, systems for exit due to smoke and fire, and fire resistance of construction elements, from doors in 3 hours walls, roofs, windows, to kitchen hoods, all need to be taken into consideration.

Obviously, cost management needs an effective and efficient system of control. Work scheduling, material and labour, technical aspects, quality standard control measures, all need to be monitored in detail so that any budget overruns can be managed well in advance.

It is in the planning stage that the major costs are reduced, the stage where the hoteliers, architects, interior designers, suppliers, lighting and acoustic consultants, etc., create value-design, which is then supported by value-engineering.

 

The basics in resort development space planning and design

If you as the hotel developer or owner do not know where your “Center” is, maybe you do not know you should have one. What is it? It is that little space where a couple or a single guy would feel most comfortable being in, when no one else is around.

At a resort, may be it is that spot in the pool area or at the terrace bar. At a city hotel, the lobby bar and the restaurants all need a favorite and comfortable center, the most homey spot in the house. Like that old lounge in the den you go to on a raining winter night to watch Sunday night football with your dog.

Too many resort hotel developers, operators and designers make impatient and non-carefully thought-out decisions on layouts and use of space. Extraordinary attention to details is needed for key small space planning where this couple and the single guy will spend hours. These areas form the long-lasting consolidated impression of many clients. They are keys to the property’s success, especially in a resort where customers hang around longer.

We have a talent for space planning that ONLY hospitality people who have worked in hotel spaces for years would have. This is a skill that is critical to a project’s success and can save you heaps of money in effective utilization or reduction of building space.

Do architects have this skill in planning? No. Do interior designers? No. But together with a ‘user’, that is, the hotelier, who utilizes the space day in and day out, hence knows what he is talking about, this is a winning solution.

We have the ability to think through carefully the impression that you will give to the customer who frequents your hotel in the off-season, in a quiet period, during down-time. We recognize that not 100% of the space will be used 100% of the time; and at down times, we need to be aware of the ambiance that is lost when the space is empty of clients.

Most of all, without the eye-for-details input that can only originate from experienced hoteliers, architects and interior designers will inevitably fall short on practicality.

Reflection: when I was the General Manager of a soon-to-be Four Seasons at Kuda Huraa in the Maldives, I spent the first weeks designing each restaurant table, the width, the length, the thickness and the height, not forgetting the lighting, the wine display, the condiment container, the sugar, the creamer, all had to be measured and their movements anticipated. My Executive Chef and I ‘sat’ in each seat and anticipated the view, the waiters’ traffic patterns and the face contact with other clients. It was not an accident that we had 80% occupancy in the fist 8 months after opening and was acknowledged as one of the 10 best small hotels in the world by Conde Nast Traveler as early as in the first year.

As resort hotel consultants and business advisers with our experience and insights as hoteliers we can help developers save tons of money in formulating the build-out program, and owners will reap the benefit down the road in maximizing profit and future asset value due to effective space planning and creating operating concepts that will not just work, but really position the resort above the crowd.  If you are planning to expand an existing hotel or build a new one then our thinking and eye-for-details can be paramount to the success of your project.

Building and fire safety codes in hotel development

Local building codes must be incorporated into each hotel design of course, yet the important step of ensuring all furniture, fittings and interior finishes are as fire and flame resistant as desired is perhaps not on the radar screen sufficiently enough during the design process for many independents, who do not have the support structure of a brand development team.

One important topic on this subject, and probably the most and single largest fire hazard in a hotel is the choice of all furniture, fixtures and interior finishes, with beddings at the top of the list where many fires over the years have initiated from.

The rating for all these materials is based on their ability to reduce the spread of fire and minimize smoke. All this is a bit complicated, as there obviously is a fine balance between the choices of visual attractiveness, wear and tear, and fire spread ability.

The importance of the Interior Designer, with the major responsibilities associated with this topic is more important in hotels than other building types. Hoteliers use what is called the coordination matrix, a tool to ensure that all responsibilities in the relationship between the architect and the interior designer are taken into account. The biggest issue is usually within the fixed décor, the finishes that apply to walls, ceilings, and millwork, and the make up of the guest bedroom.

So for all those smaller independent developers, not associated with brands and therefore unable to use their development teams who have years of experience in advising owners and developers, the responsibility is on their shoulders to ensure the right questions are asked to get the right results.

All interior finishing should have a smoke development rating less than 300. In cruise ships it is far less than that.

I wonder how many small independent hotel developers and operators have even thought about this in some parts of the world, let alone implemented it 90% correctly.

Add to that, budget limitations, capacity of exits, fire breaks in design, occupant load issues, travel distance to protected area, fire resistive and fire-retardant and other non flammable materials and you get the point – do not take short cuts with the quality appointment of the Interior Designer and a Hotel Consultant to guide him or her.

For hotel development support, working with your Interior Designer to get it all right, contact mark@turnerlodgingco.com.