Hotel & Motel Management - August 2008 - (Page 142) 142 Timeshare MIXED-USE DEVELOPMENTS H&MM August 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Mixed-use holds promise, challenges IN THE details Mixed-use a financial win Operating efficiencies can make mixed-use developments with vacation ownership components more profitable. However, financing and legal considerations can be a challenge. Share staff, amenities Include flexibility from start Examine legal documents By Christine Blank CONTRIBUTING EDITOR ON time Wyndham Vacation Ownership started sales at Wyndham Vacation Resorts Panama City Beach, the company’s fifth vacation ownership resort in the Florida Panhandle. Interval International and Diamond Resorts International entered into a long-term master affiliation agreement comprising more than 110 existing resorts worldwide, as well as any properties developed during the term of the agreement. Starwood Hotels & Resorts Worldwide welcomed its first guests and owners to its third vacation ownership resort in Hawaii, The Westin Princeville Ocean Resort Villas. The oceanfront property comprises 18.5 acres and 173 two-bedroom villas. The Ritz-Carlton Club introduced its 10th club in Vail, Colo. The Ritz-Carlton Club, Vail, will be developed at the base of Vail Mountain in LionsHead Village and neighboring the banks of Gore Creek, offering a proposed 45 fractional club residences featuring Vail’s traditional Bavarian-style architecture hailing from ski resorts in Europe. The residences will incorporate two-, three- and fourbedroom floor plans from 1,300 to 2,874 square feet. Fairmont Hotels & Resorts will open two Breckenridge, Colo., developments: the $160-million Fairmont Residences, Shock Hill, and Fairmont Residences, On the River, both anticipated to open in 2010. The developments’ style, termed “rustic zen” by the designers, incorporates the tradition of National Park Architecture with an international flair. Compiled by Heather Gunter, hgunter@questex.com ixed-use developments with vacation ownership components can be a financial win for owners and developers, according to industry consultants. “There are a lot of economic benefits for everyone involved because of sharing expenses. For example, you can use the same staff for housekeeping and security,” said Kathryn Plouff, president, Plouff Equity Co., a vacation ownership consulting company. Restaurants, fitness centers, spas, golf facilities and other areas also can be shared, allowing for increased efficiencies. Hotels in the right area and with the correct setup have become more profitable by adding a timeshare component, according to Plouff. For example, the owners of a convention hotel in Aspen, Colo., realized that the property’s convention space was not as profitable M The Westin Kierland Villas and The Westin Kierland Resort and Spa in Scottsdale, Ariz., is located in the master-planned, 730-acre Kierland Community. as they would have liked, so they took out the meeting space and made half of the hotel guestrooms into vacation ownership units. “By shrinking the hotel, it made the hotel that much more profitable and occupancy increased,” Plouff said. Mixed-use cautions While mixed-use projects with timeshare components hold financial promise, Plouff and other consultants are aware it is difficult to fund many projects in the current lending environment. “The No. 1 challenge today is financing,” said Anthony Polvino, a partner in Weinstock & Scavo, a law firm that specializes in resort development. However, to spur approval of projects, many developers are placing personal guarantees on repayment of loans, according to Polvino. “Because property was appreciating so much in the past few years, developers were able to do the deals without personal guarantees. Even with highly successful developers, you are seeing the return of personal guarantees,” Polvino said. For projects that are approved, consultants caution that legal aspects of mixed-use developments must be set up carefully to prevent problems down the road. “You have to have all your legal agreements in place, especially if different parties own different components,” Plouff said. Legal and financial documents must carefully spell out what happens in the event of a sale or the addition of vacation ownership units. “Flexibility at the front end in any development document is critical. You would want to disclose, for example, that there could be timeshare in there,” Polvino said. It is important to include flexibility from the start because it is hard to fix problems associated with adding timeshare to projects later. In Florida, for example, state law prohibits developers from including timeshare units in their projects, unless the property was designated for that use from the beginning or every original owner later agrees to allow some timeshare component, according to Polvino. “Think about the difficulty of going back to the original 10 folks you sold to and having to get their approval,” Polvino said. Choosing the right location for a mixed-use project with a timeshare component also is very important. Some hotel companies believe that adding some vacation ownership, residential or commercial component will boost revenues across the board. “You have to make sure timeshare works in that area,” Polvino said. “That area may not have enough tourist attractions or transient population. You have to go back to the basic principles of real estate and ask, ‘What is the highest and best use of my property?’” hmm@questex.com Timeshare unit sales, supply climb in 2007 Washington, D.C.–U.S. timeshare sales climbed 6 percent over 2006, with sales totaling $10.6 billion in 2007, according to Ernst & Young. The survey of 628 timeshare resorts showed sales up 66 percent since 2003 and an average resort size growth of 32 percent. As of Jan. 1, 2007, there were 1,641 timeshare resorts in the U.S. The total number of weekly equivalent intervals owned was about 6.5 million, and new owners increased to 4.7 million. “The continued growth of the timeshare industry in today’s economy is a direct indication of strong consumer satisfaction and demand,” said Howard Nusbaum, American Resort Development Assn. president and CEO. “Vacation ownership, with its flexibility and spacious accommodations, continues to be a preferred travel choice for American families.” The number of timeshare units in the U.S. was 180,158, with 8,000 new units built in 2007. Respondents expect continued growth, with around 8,000 new units built in 2008. Average occupancy was more than 80 percent in 2007, including nearly 70 percent who were either owners or exchange guests and more than 10 percent who were renters and/or marketing guests. Florida, California and South Carolina have the most resorts, representing 39 percent of all U.S. timeshare resorts. Florida continues to have the most resorts (23 percent), the largest resorts and the greatest sales volume. California houses 9 percent of timeshare resorts, followed by South Carolina at 7 percent. Beach resorts are the most common primary designation of resorts (24 percent), and country/ lake resorts second (16 percent). Two-bedroom units continue to represent the most common size (61 percent), followed by onebedroom (24 percent). The average price of a timeshare interval sold was $19,216. hmm@questex.com STARWOOD HOTELS & RESORTS WORLDWIDE http://HotelMotel.com http://www.HotelMotel.com/digital_edition
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