Condotel Room Rotation Formulas - Does it make a difference?

October 23, 2007

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The Condo Hotel Insider - Oct 2007 -  Room Rotation Formulas

Wow, What an absolute crazy, busy month it has been. I am certainly not complaining, but as the saying goes, when it rains, it pours (especially now as I look outside at a typical Vancouver October day ....wet, and cold). Anyway, it has been a good month, with lots of opportunitity coming our way.

Amazingly enough, I hear a lot about the soft condo-hotel market, however, a good real estate product will still sell if it is promoted to the right people for the right reasons. Obviously with condominium hotel units, the key is promoting a lifestyle choice, not a quick return on investment. Sure, you can make money in the long run with a condo-hotel unit and appreciation, however, I believe that far to many people purchase expecting to pay all their expenses, and generate a healthy profit right away. The reality is, it is difficult to make a profit with a condo-hotel unit, for the unit owner, and the management company.

Resort hotel occupancy and profit is subject to many factors. In the area that I live, the weather is probably a major one and it is something that there is no control over. A bad snow year in a ski resort, or lots of rain at a beach resort can have drastic effects on occupancy. Ultimately the operation needs to be lean, efficient, financially well backed, and well marketed to succeed. The owners (and I mean the property owners as compared to the individual unit owners) need to be prepared to take the good with the bad, and wait out the storm. At least for the time being, there won't be any quick money made developing these types of properties. It is a long term investment and everyone has to view it that way.

OK, enough of that.

I want to focus on Fair Usage rotation this month, the thing that every owner wants to insure is happening to their unit. First of all, if your property is fortunate enough to take advantage of revenue pooling, room rotation becomes a non issue. Since revenue is allocated to units based on the "Common Interest Rate", all units share in the revenue regardless of whether or not they are rented. Unfortunately, many properties cannot participate in this program, so a formula and method for rotation must be utilized.

Although there are a number of formulas that can be used, let's look at a franchise condo-hotel that assumes all units of the same type are treated equally. The key here, is that all 1 bedrooms are treated the same, 2 bedrooms are treated the same, 3 bedrooms, etc. There is no priority given to a unit on the 10th floor vs a 1st floor unit. In this case, I recommend using earned and forecast revenue, as well as average revenue for comps, owner stays, and defined segment codes. The earned revenue, as well as "average" revenue is put into a bucket, and units are sorted based the total revenue in the bucket. The units with the lowest revenue appear at the top, and the highest revenue appear at the bottom. I do recommend blocking the first 20 or so units in the list (or you can do 10% of the total units available in your inventory) of that days arrivals based on the report that is generated. Auto booking is fine, however, you will get more control and likely a better yield by manually blocking the units. Why would you only need to preblock 10%? Because the first 20 or so units will have the lowest revenue, and therefore require immediate attention. The rest of the units will already have a higher revenue earned, and they will naturally flow to the top of the list as time goes on.

The second way of fair usage rotation is to use a combination of revenue and points. This is usually done in cases where different units are rated based on the shape they are in, location, view, etc. It works best for non franchise properties where the owner has a lot of control over how their unit looks and condition. In this case, you look at revenue, but you also use a point value assigned to each unit. Those with a higher point value are usually given priority when booking. Obviously, as an owner it pays to keep your unit in good good condition as this should give you more bookings and revenue.

Whatever formula is used, you should be able to review the data on a regular basis to insure that the units are being booked fairly. Hopefully, reports are available to show this detail (such as the ones available OwnerRelations.com Technology).

Anyway, that's all for this month. I hope that you find this information handy, and as usual, if anyone has any questions, comments, or suggestions please send an e-mail to frank@ownerrelations.com .

Also, keep OwnerRelations Technology (http://www.OwnerRelations.com) in mind if you need condo-hotel software, or a consultant to help in your planning. Until next month. Frank Franchini President OwnerRelations Technology Your Condo-Hotel and Fractional property software solution specialists http://www.ownerrelations.com

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