Do Tell: Condo-tels Go Mainstream
Author: Sandi Cain
January 2008
Features
Just when you thought you knew the ropes on hotel negotiations, along come condo-tels—throwing a monkey wrench into your well-organized site-selection process.
But don’t be too quick to hit that “delete” button on your current RFP, because you may not need to change a thing.
With today’s evolving crop of hotel products, condo-tels and timeshares provide meeting planners with additional options for group lodging—particularly in urban and resort areas. These products have been predominant in resort locations for many years, catering mostly to a leisure market. But they’ve also been a boon for incentive groups headed to the slopes and corporate groups seeking a campus atmosphere for board meetings or retreats.
“There’s a lot more (of this) product today designed for owner use that has a rental component,” says Howard Nusbaum, president and CEO of Washington, D.C.-based American Resort Development Association, which represents the shared-ownership industry. “They still need rental guests, so the meeting planning market is an important market in the rental side,” he says.
Now, more such properties are moving into the mainstream, with combination condo-tels like Hotel del Coronado in San Diego and The Boulders in Scottsdale boasting significant meeting space in their own right. And there are more on the way. In Las Vegas, for instance, the Grand Hyatt at Cosmopolitan will have 150,000 sq. ft. of meeting space and a 35,000-square-foot ballroom that opens on the Casino Beach Club along with custom-designed rooms—2,998 of them—just a few blocks from the convention center.
According to Nusbaum, planners are likely to find ample such products in places like Las Vegas, Hawaii, Orlando or Scottsdale. “It’s resort and urban driven,” he says. “If you’re having a meeting in Peoria, it’s probably not an issue.”
Marriott is widely credited with being the first major hotel brand to move into shared-ownership products in the 1990s. Other hoteliers have followed, including Starwood Hotels & Resorts Worldwide and Global Hyatt Corp. The newer, luxury products are attractive to a meetings market seeking upscale amenities without top-dollar prices.
“It’s a shift taking the world by storm,” says Tim Brown, managing partner of Meeting Sites Resource in Newport Beach.
Name of the Game
Lodging properties that have both owner units and transient units go by myriad names: condo-tel, timeshare, fractional, vacation club or private residence club. While those names confer differing real estate consequences on owners, they are largely irrelevant to a meeting planner because no owner wants an available unit sitting empty any more than traditional hotels want empty rooms, so a high percentage of such units end up in the rental pool.
Bob Foster, regional director of sales and marketing for Premier Resorts International, says planners shouldn’t worry about using such properties instead of traditional hotels. “The only difference typically is a condo-tel has more owners,” he says.
The exception might be when a hotel converts to condos that aren’t going to have a rental pool. If such a transaction is in the works, planners are advised to tread cautiously in booking to avoid a shortage of rooms, as happened to one client of Meeting Site Resources in Newport Beach, Calif. when a major Los Angeles hotel closed for conversion.
Most partial-ownership properties attractive to meeting planners fall into the condo-tel or timeshare/fractional categories.
• Condo-tels contain some combination of owned and rental units. Many are managed by luxury hotel brands, adding the advantage of top-notch amenities a planner may have to negotiate for at other hotels. Other condo-tels are 100 percent privately owned, with owners having the option to place their units back in the rental pool to be used as hotel rooms when they are not using them. Being in the rental pool helps owners generate income to pay for maintenance fees and mortgages, while planners benefit from using a decidedly upscale facility instead of a traditional hotel room. Typically, the ownership/rental arrangement doesn’t affect the meeting planner except as it pertains to the total number of units available for rent in any given time period.
The new generation of condo-tel products more often has significant meeting space along with the condo units, making them attractive as destinations for groups. The Grand Hyatt Las Vegas will be one such property when it debuts in 2009. It will have roughly 3,000 units, with 800 of those dedicated to full-time hotel use. It also will have 150,000 sq. ft. of meeting space close to the Las Vegas Convention Center. These newer projects are more often part of larger, mixed-use developments, adding the attraction of additional retail, restaurant and entertainment options within walking distance of the lodging.
“Hotel-enhanced mixed-use is the perfect marriage of hotels with other real estate product types, with each component functioning independently but also significantly contributing to the value and functionality of other components,” says Jim Butler, a hotel lawyer and partner of the Los Angeles law firm Jeffer, Mangels, Butler & Marmaro LLP.
• Timeshares/fractionals generally are geared to the leisure market and typically have multiple owners for each unit. While in the sales phase, they may rent unsold units or time periods to groups. But once the inventory is sold, the owner occupancy goes up, sometimes leading to a smaller rental pool for transient uses.
Timeshare and fractional condos often are found in resort areas like Lake Tahoe; Park City, Utah; Palm Springs, Calif.; or in the Rocky Mountains outside Denver. Older developments tend to have only small meeting space available for planners. But property managers increasingly are courting group business and many are adding meeting space at the resorts. These are particularly attractive for incentive groups due to easily available recreational activities. The units also may be spread out among multiple buildings in the resort, which planners need to consider when booking these properties.
Who Goes There?
Planners with small groups needn’t worry about dedicated meeting space if they can book a condo big enough for a board meeting or hospitality suite. Incentive groups love resort settings for the variety of activities for those specialized programs.
Some planners use condos for executives or VIPs who may use them to entertain clients—something they may not be as likely to do in a hotel room. Others, such as the medical meeting planners that are a heavy user of Keystone Conference Center in Colorado, find more attendees bring their families along because there’s, well, room at the inn.
ResortQuest Steamboat hosts many small medical and dental groups whose members combine a vacation with earning CEU credits. They bring their families to ski or enjoy other seasonal activities, says Liz Hammer, group sales manager. “It’s a great incentive destination and there’s plenty to do for nonskiers,” she says.
Convention center-close properties like Ala Moana in Honolulu provide an ideal spot for overflow attendees after the room block is sold out. “We typically use the Ala Moana (or similar properties) for overflow during citywide conventions,” says Arlene Davie, president of Travel Planners Inc. in San Antonio, Texas. “We always put (Ala Moana) in the mix if we’re using the convention center, especially for exhibitors and government attendees on a budget,” she says. “It can be very affordable if you negotiate it right.” Ala Moana Director of Sales Marty Milan says converting to an ownership hotel helps generate funds to put back into remodeling the property, too.
The Plus Side
Why, you may ask, should you plod around half a dozen condo properties when you could easily put your whole group in a hotel? There are benefits, some planners say.
• According to Tim Brown, of Meeting Sites Resource, larger groups may end up with more upgrades by using condos than a traditional hotel because there’s more such inventory available. That also helps if you have a big contingent of VIPs, he says.
• Marc Sapoznik, marketing and PR manager for the Resort at Squaw Creek in the North Lake Tahoe region, says it gives planners more flexibility in room size—even up to 1,000-square-foot units—and the group can spread out around the resort. In addition, Squaw Creek has 33,000 sq. ft. of indoor meeting space. “It’s seamless for planners,” he says. “We speak the same language as a hotel.”
• A campus-style property with everything in walking distance can still feel like it’s a million miles away from civilization. Vanessa Berning, director of sales and marketing at Seventh Mountain Resort near Bend, Ore., says the property draws both corporate and association groups who like the exclusivity the resort offers with just 170 guest rooms. “We have to be competitive with resorts that have hotel rooms,” Berning says. “Associations like that because they can bring their families and get competitive rates.”
• The Oregon Crime Defense Lawyers Association uses the resort every year in part because it is “cost effective for families or multiple participants sharing units,” says Executive Director John Potter.
• Mary Bamer Ramsier of the American School Health Association in Kent, Ohio, found it easy to negotiate an extended group rate for pre- and post-meeting days at the Ala Moana. She said her group also enjoyed room amenities that typically would cost extra in Hawaii but were standard at the condo-tel.
• Northstar at Tahoe offers three levels of lodging that allow planners to choose anything from a studio to a four-bedroom condo, providing flexibility in lodging choices. Some groups host product launches and sales incentive meetings in the condos.
Sometimes the property itself presents an upside. Michael Erickson, director of sales for KSL Resorts in California, whose shared ownership properties include new villas at Hotel del Coronado and La Costa Resort in San Diego, says those historic properties are a draw for association business. “It helps them get 15 percent to 25 percent higher attendance,” he says. The Hotel Del Coronado added new villas and beach condos last year, treating those like a hotel within a hotel that has its own rate structure, Erickson says. “When we’ve added this type of product, it’s raised the bar for the other rooms on the property for upgrades,” he says. The shared ownership villas at KSL’s La Costa increased its room inventory and helped the legendary golf resort attract larger groups than they could accommodate before.
As new properties go up in urban or semi-urban areas like Las Vegas and Reno, there’s another benefit for planners: extra-luxe accommodations for executives or VIPs. The Grand Sierra Resort & Casino in Reno, for instance, features newly transformed Summit suites, located on their highest floors, with breathtaking views, ultra-sophisticated décor, spa-inspired bathrooms and much more. Resort areas like Vail continue to add to the condo-tel inventory, too. The Arrabelle at Vail Square by RockResorts is set to open this month, with a much-anticipated inventory of 36 hotel units and 50 condo units.
Extra Attention Needed
There are a few areas where planners need to exert caution (also see “So About That Site Inspection,” below). Planners seeking a resort or campus-style environment may indeed have to visit several condo buildings to get a true sense of the room inventory and to get the block they need in the right types of rooms. Typically, planners needn’t worry about standards for décor. Many condo-tel units come furnished to account for that concern. And where owners are allowed to add personal touches, they usually must do so within strict association guidelines. A few, like the new Hard Rock Hotel in San Diego, have custom-designed units as part of the hotel’s theme. In those cases, planners should ask whether or not they can be guaranteed certain units.
Brown also cautions that planners should have a passing knowledge of the management group. “They may have meeting space but not the services that typically come with that (space),” he says. It’s worth making sure.
Every now and then, when a timeshare sells out, it reduces the pool of rentable rooms in an area. That’s what happened on Kauai when the big Marriott development finally sold out. “The Kauai Marriott is now split into two and pretty full with owners, and the result is a decrease of (hotel room) inventory,” says Edie Hafdahl of the Hawaii VCB. Typically, that only impacts overflow from booked room blocks, she says.
Unique Properties
Keystone, the closest ski resort in the Rockies to Denver city limits—just opened a new spa at Keystone Lodge and has instituted a green meetings program. But what sets it apart from many other shared-ownership resorts is its Keystone Conference Center, which has 100,000 sq. ft. of meeting, exhibit and function space and is the largest conference site in the Colorado Rockies. Keystone manages its own lodging through Vail Resorts to make sure its groups get what they need, though some other companies have timeshare buildings in the community. In all, there are more than 1,500 rental units in Keystone. A shuttle service allows families to get around the resort while attendees are busy at work.
In Scottsdale, Ariz., The Boulders has 54 villas that each have one owner who contracts with the resort for rentals. The resort, in turn, manages the homes. That arrangement isn’t unique, but the property is. Owners can do their own décor—within homeowner association guidelines—and the larger haciendas are available for receptions and dinners as well as for lodging.
Director of Sales Jeff Gillick says the resort is about to debut a two-villa unit that can be used to house VIPs, particularly from the resort’s incentive and insurance company business. The two-villa unit also has a center courtyard appropriate for outdoor events. While the property features 12,000 sq. ft. of indoor meeting space and its own golf course, Gillick says the geography makes it unique. “You can’t replicate 12 million years of boulders,” he says.
So, planners, rest easy. Condo-tels are probably here to stay—at least for the foreseeable future. They’re not the alien nation—they just have a different ownership structure. And it’s one that can benefit you. While some condo-tel projects have been cancelled in the wake of the mortgage credit fallout, many are still in the works. Credit may be tighter, but those driving the boom in this sector are less likely to be the ones in a pinch with their mortgages, making the condo-hotel an attractive option both for developers and savvy planners.
Where The Condos Are
According to a 2007 Ernst & Young study, there were 176,232 timeshare units as of January 2007, with 14,000 of those coming on line in 2006 alone. Planned units as of 2007 include roughly 8,000 in the Pacific region, 6,300 in California and almost 12,000 in the mountain region.
California ranks second in the U.S. in the number of shared-ownership properties with 8 percent—far behind Florida, the national leader at 23 percent. The mountain region has 17 percent of current inventory and the Pacific region has 9 percent.
Finding them on your own may be a challenge in some areas, unless you’re already familiar with some of the management companies. If you’re not, let the local CVB know you want to include condo-tels in the hotel package and ask them for references, says Howard Nusbaum, president and CEO of Washington, D.C.-based American Resort Development Association.
One of the largest operators is ResortQuest (formerly Aston Hotels), which manages 26 properties in Hawaii alone, including venerable favorites like the Kaanapali Shores, Waimea Plantation and Poipu Kai. The company also has resorts in Deer Valley, Utah; Beaver Run and Steamboat Springs in Colorado; and markets in Florida and South Carolina.
Another is Premier Resorts International, which operates 2,600 units with 7,000 rooms in Park City, Utah; South Lake Tahoe, Breckenridge, Vail and Telluride, Colo.; and in Hawaii, Idaho, Oregon, Los Cabos, Mexico and the San Juan Islands in Washington. It also operates the
Deer Valley Chateaux and Lodges and Beaver Run in
the Rockies.
“Executives use the condos for entertaining,” says Robert Foster, regional director of sales and marketing for Premier Resorts International. Some groups meet in the morning, ski in the afternoon and have another meeting session in the evening—flexibility that the condo properties can easily offer.
So About That Site Inspection...
At a loss about what to ask when you’re poking around a condo-tel or timeshare property as a potential site for a client meeting? Go with your usual hotel queries and then consider some of the questions below to get a better handle on how the property works with its inventory.
• Have all the available units been sold?
• Roughly what percent of the total units are in the rental pool?
• Tim Brown, managing partner of Meeting Sites Resource in Newport Beach, says it’s important to ask how many of each room type you are guaranteed in order to determine who gets them. “Controlling [your] inventory is essential,” he says.
• Brown says planners also need to be diligent in breach- by-hotel contract language to avoid problems if a conversion to pure owner-occupied condos is scheduled after the contract is signed.
• Ask about bed taxes: How taxes are levied on condo-tel operations can vary from state to state and/or city to city. Know up front what to expect.
Shared-Ownership Industry Flying High
Baby Boomers are driving the rebirth of the shared-ownership resorts through a desire to own flexible vacation products and travel with their families. Shared-ownership sales jumped 16 percent from 2005 to 2006, reaching the $10-billion mark, according to a study by Ernst & Young last summer. Occupancy in 2006 averaged 81 percent, compared to the average hotel occupancy nationwide of 63 percent reported by Hendersonville, Tenn.-based Smith Travel Research.
Baby Boomers are driving the rebirth of the shared-ownership resorts through a desire to own flexible vacation products and travel with their families. Shared-ownership sales jumped 16 percent from 2005 to 2006, reaching the $10-billion mark, according to a study by Ernst & Young last summer. Occupancy in 2006 averaged 81 percent, compared to the average hotel occupancy nationwide of 63 percent reported by Hendersonville, Tenn.-based Smith Travel Research.
