In the Condo-Hotel Business? Avoid 'Bad' PR with Proper Reserve Management
By Georgi Bohrod, Principal, GBG & Associates
Are you in the condo-hotel business? There are already reports surfacing regarding legal issues stemming from poor asset management. Although condo-hotels are sexy, popular and full of promise, they come with their own set of challenges.
Jeff Yamaguchi, EVP, Global Resorts Inc. (Las Vegas) cautions that there are sure fire ways to ensure a good reputation for your Condo-Hotel:
Not only can your PR "people" ensure that the message is transmitted accurately, but there are nuts and bolts procedures that can preserve the reputation of your property.
Whether a Condo-Hotel, Private Residence Club, Timeshare or Fractional Property, shared ownership has become a luxury commodity; lifestyle experiences have replaced budget vacations; and reserves are not just for replacing the roof any more. Unless resort and hotel managers have the proper financial tools to manage the assets, they could be faced with a rude awakening in the coming years.
In the past, establishing reserve budget costs was little more than estimating a fixed percentage of the operating fees at the start of a project and then crossing your fingers. The time of the traditional "WAG" (loosely translated as wild ass guessing) is long gone. Welcome to the world of Association reserve shortfalls, special assessments and even law suits.
In the world of shared ownership and mixed-use development, the introduction of brands has substantially changed the playing field. Customers' trust in traditional hospitality brands such as Marriott, Starwood, and Four Seasons along (in the timeshare world) of brands such as Bluegreen, Vistana, and Sunterra has propelled shared ownership into a multi-billion dollar industry. But along with that added credibility comes added responsibility; both brands and independents are charged with living up to a series of higher standards.
As Yamaguchi says, "Regardless of what any HOA Board of Directors might say, brand image is the lifeblood of many resorts; if a resort doesn't live up to the image, the brand name can simply be taken away. Then in hindsight, the question finally gets asked - 'What do we need to do to keep up with the ever-changing standard?'"
Accounting for and managing a reserve fund is nothing new, but the stakes are much higher today than they have ever been. In a recent article in a resort trade publication, Michelle Tanzer, Esq. (Holland & Knight, in Florida) who represents resort and residential developers) said "the number of lawsuits filed against developers in the past few years is on the rise. A significant number are based on the premise that the developer has failed to appropriately maintain reserve accounts and funding. A developer can help protect him/her self from attack by instituting an integrated system for resort and reserve management."
Unfortunately, developers, management companies, and association boards have been slow to look more closely at how the primary assets are accounted for and maintained once owners take occupancy. With the emergence of new products like condo-hotels and destination clubs taking center stage, the gap continues to widen and potential risk of litigation rises dramatically.
Unless reserve monies have been budgeted, invested and managed proactively, a special assessment is the only solution when the needs and financial resources of the Association are not in alignment. Because customers have become more sophisticated and educated, this issue will not be taken lightly. They may get angry and seek legal counsel to investigate exactly why a special assessment is being imposed.
So how do you avoid this trap? Just like any other business where assets are being managed, the answer is simple - proper planning, accurate documentation, and full disclosure.
In order to maintain the financial health and value of any development over time, it is imperative that developers, management companies, and Boards take stock in their current reserve situation and take steps to make sure that they have accurately documented the status of all their assets.
With the number of new products on the horizon, developers and operations executives are looking for a tried and true financial and operations platform which can be configured to fit their specific needs. By mining this new source of centralized, detailed information, resort companies can cut budgeting prep time, improve maintenance staff efficiency and accountability, and lower asset life-cycle costs across the enterprise. And, very importantly, can be well ahead of the curve when it comes to reporting to Boards of Directors and Regulatory Agencies.
In the same article published in 2007, Joseph Aiu of the California Department of Real Estate agrees. "A mechanism that will collate, project and track costs should be considered an essential tool for the developer. Without such a mechanism in place, the developer would be hard-pressed to respond to governmental regulatory inquiries directed to questionable financial figures."
Until recently resort operational areas such as Work Order Management, Preventive Maintenance, FF&E Inventory, Asset Replacement and Remodeling as well as Expense Tracking for Budget Accounting have only existed in separate, off-line, systems.
Taking advantage of customizable software integration and data management tools, managers now have an ability to connect the activity data of vital operations with traditional PMS, Accounting and Engineering systems. Resort managers and staff can draw on and coordinate detailed information from the entire life-cycle of financial, engineering, and maintenance events drawn from day-to-day resort operations activities.
Leading resort companies, such as Sunterra and The Signature at MGM Grand are finding new ways of cutting costs, saving staff time, and improving service by integrating and mining existing sources of key information outside their traditional Property Management Services (PMS) systems by using systems such as Katana Software's Asgard.
Brian Schultz, who works with The Asgard Facility Asset Control System, says it "represents a terrific approach to both managing the assets in a facility and projecting for their replacement. It is an ideal application for both the hospitality industry, as well as large homeowner community associations."
"The importance of this type of tool across all segments of the industry is that it assists with any regulatory and auditing processes," says Schultz. "A comprehensive but user-friendly tool which addresses all varieties of shared ownership allows for full-disclosure and accountability to the owners and Boards of Directors."
As the game plan changes, so must the equipment. In the future, Resort Managers and Developers will need to team up with integrated systems that protect them while facilitating the ease of managing a resort. Not only will this strategy promote consistent financial stability over the years, but also help reduce the potential of legal pain in the future.
Consumers, particularly those of condo-hotel properties need to be assured that systems are in place to protect them. Knowing this will save both the public relations pain of "saving the reputation" of the property and the legal pain of a law suit down the line.
Georgi Bohrod, RRP leads a consortium of writers, media specialists and graphic designers at GBG & Associates. GBG specializes in the integration of multiple marketing and public relations strategies to fulfill client business goals. The company has implemented marketing, advertising and public relations programs for hotels, timeshare resorts, resort developers, small businesses, service providers and travel industry corporations. Under the leadership of Georgi Bohrod, the company has won countless awards for collateral material design, interactive media design and public relations. Ms. Bohrod can be contacted at 760-803-4522 or email@example.com Extended Bio...
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