Resort condominium hotels one way to own recreational property

Saturday, August 27th, 2005

Resort condominium hotels are a no-hassle way to own recreational property, while enjoying the opportunity to generate earnings and capital appreciation, two executives involved in an Ucluelet resort write

Mike Duggan and James Askew

In the last 10 years the number of people searching for and purchasing recreational real estate in North America has grown tremendously, not just for the proverbial cabin in the woods or cottage by the sea, but for ski and lake and golf resorts.

One of the fastest growing and most successful sectors of the recreational real-estate market is the resort-condominium hotel sector.

This sector has proven popular throughout North America for several reasons:

– No-hassle method to own recreational property.

Opportunity for capital appreciation.

Opportunity for monthly revenue while owner is not in residence.

– High quality amenities.

– Community resort experience.

– Ownership opportunity on prime locations typically reserved for million-dollar-plus properties.

– Fully furnished and maintained properties.

Whistler has been the leader in the resort-condominium hotel sector in British Columbia and the Pacific Northwest, with significant international hotels attracted by the marquee value of affiliation with one of the world’s great resorts as well as the return on thee investment.

Since the Pan Pacific Lodge in Whistler was developed, it has been a leader in average daily rate and resale values achieved.

There are some important decisions that need to be made in order to create a successful resort development for each stakeholder in the resort: developer, buyer, hotel manager and visitor. One of the keys to creating a great resort condominium hotel is putting together a rental management program that works well for all, so that each stakeholder has a win-win situation. For example, by creating an owner usage program that discourages full time owner residency, the hotel manager can be assured of a minimum number of available room nights to rent out per year. In this way, they can afford to hire the best quality staff to run the resort. As a result, the paying guests receive a high-touch experience and are prepared to pay more for the room, which leads to the owner and the hotel manager achieving higher revenues. As a by-product, the owners also are ensured a first-class experience when they are in residence.

For a buyer of recreational property, particularly those looking at resort condominium hotels, it is important to determine what their needs and goals are for the property. Understanding how and when they intend to use the property will help owners determine the right type of resort condominium hotel ownership and usage structure that is best for them.

Here are the key questions potential buyers should ask:

1. Who will manage my property when I’m not using it?

This is very often the most important ingredient in a successful resort condominium hotel. As most owners typically have their properties in some kind of rental program when they aren’t using it themselves, an experienced and effective hotel management company is key to driving guest occupancy and room night rates, which ultimately determines the revenue generated for the owner.

2. How does the rental revenue get split between owner and manager?

The best revenue split model is one called a “top line” model where the owners and manager split the nightly revenue before operational costs are factored in. In this way, the owner isn’t responsible for potential hotel manager cost over runs.

3. How often can I use my property, and how do I book it?

This depends on the rental management agreement that forms part of the disclosure statement accompanying your purchase agreement. Owner usage can vary from as little as 60 days per year to unlimited owner usage. For some resorts, a very limited usage is the best way to attract a name brand international hotel chain such as a Four Seasons or Pan Pacific. In other circumstances where rental revenue isn’t as critical to the owner, an unlimited owner usage program may be a better solution. It all depends on your needs as an owner. For many owners, usage up to 100 days per year is more than adequate to satisfy vacation needs. To ensure the hotel manager is able to maximize hotel occupancy, owners should be prepared to book their desired usage up to six months in advance.

4. What costs am I responsible for in the resort?

Usually, owners are responsible for any costs associated with a typical residential condominium suite. As such, owners share in the proportionate overall costs of maintaining the common areas of the building. In well-structured resort condominiums, items such as spa and restaurant would be managed and paid separately by the resort management group or a third party operator.

5. What kind of amenities should the resort have?

One of the key benefits of a resort condominium hotel is the quality of the resort amenities. Such features as a fitness centre, lounge, pool and hot tubs, are required to ensure the resort looks and feels like a high-end resort hotel. A destination spa, fine dining restaurant and lounge, and meeting facilities may also ensure that the resort competes successfully with other hotels in the region.

In conclusion, with due diligence, resort condominium hotels are a very popular option for people to enter the exciting and rewarding world of recreational real estate. In order for buyers to assess which type of structure is right for them, it is important to consider their needs as both a user and investor in the property. The resort condominium hotel concept is a proven and effective means of ownership due to its ability to give owners a luxury resort ownership experience in prime locations without the need to invest millions of dollars in the process, and by helping create a revenue stream when owners are not in residence.

© The Vancouver Sun 2005

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