Rising Costs of Resort Development!!
Costs are up!! Everything costs more!! Land, materials, labor, permits etc, etc. Where does it end? We don’t know. But we do know that the current inflationary period is very similar to what we lived through in the mid to late 70s and what we have seen other countries go through in the past 10 years. We know from this that some resorts and resort developers will survive. Some will not. Below we have tried to outline some basic “Truths” about rising costs in resort development that may help with your planning.
#1 Acquisition costs of raw land in the top 25 resort destinations in North America have gone up over 500% since 2011. This will force wise developers to seek cheaper raw land in other, less popular areas and or to redevelop older, dated properties and or to partner with retail and other non-resort operators such as motels, restaurants, auto shops, malls etc., with easements to beach, river, trails etc, that are located in or near resort destinations for a re-development opportunity. Density will increase and volume operations will be one of the keys to survival.
#2 Development costs must be controlled. Shrinking the size of lots, rooms, pools, golf courses etc will be key. Large magnificent sales models are fine…for selling, but your average unit will need to be smaller, well designed and more efficient. According to DLB Industries, “shrinking development budgets by 10% often gets rid of the “fat” that grew during the boom times and needs to be cut anyway. This 10% cut is just exactly like a 10% increase in sales volume.” Instead of building just in time inventory or in phases, order all your materials that can be stored, in advance, for the entire project.
#3 Profit centers must be invented. Parking fees, laundry service, vending machines, paid towel service at the pool, 3 day fitness memberships for the fitness center are some small revenue streams that add up in a big way throughout the year. On site tour and sight seeing vendors, golf cart, telescope and bicycle rentals, gift shops, airport shuttle and car detailing are some moderate priced ideas that produce significant revenue streams. All of these can be sold at check in, at walk up booths, on line via the tv network and directly at the amenity by staff that is already there and being paid.
#4 Recurring revenue/memberships/clubs and related upgrades can produce large and often recurring revenue streams for almost any resort. Pre-selling a stay for the following year with a modest deposit before the guest checks out is easy and produces significant cash flow. Selling a Gold, Silver and Bronze membership at check in that allows the guest to use the above listed amenities at various time or levels is a big deal some people. A dining or bar membership works well also. A designated “club” area at the pool, bar, lift, etc where by guests get a little extra something and feel upgraded from the crowd is a big seller and produces extra cash flow with very low incremental costs.
#5 Cut costs!!! What a great idea. When times are good it is very easy to upgrade the lobby furniture or replace the mirrors behind the bar or change out the dated light fixtures. Sure…that’s natural. But when times get lean you would be surprised at how thriftily you can run a resort. Indoor and outdoor lights can be put on timers. The heated pool hours can be reduced. Thermostats on hot tubs can be regulated to only get “warm” instead of uncomfortably hot. Garbage pickup can be streamlined and only picked up once a week. Cloth napkins can be replaced with paper. Free newspapers can be eliminated. Outdoor showers, ski lockers, boat slips, tennis courts and observation decks can be closed 3 days a week. Security personnel can be reduced based weekdays vs weekends or double as bellmen or scannable wrist bands can be issued. Kitchen hours can be reduced. Deferred maintenance can be extended. Furniture upgrades/ replacements can be postponed.
Just get thrifty. Inflationary periods do allow for price increases so as to create a kind of pricing umbrella and it is easy to post explanations to your guests blaming on the government, inflation, the war in Ukraine etc.
Be Careful What You Ask For
Well the travel, resort and timeshare industry has survived another “first of its kind” crisis. Although the Covid stuff did hurt, and hurt badly for some, most survived. The public companies saw their stock values retreat 50% +. PE and Hedge Fund owned resorts and developers saw balance sheet shrinkage, loss of top personnel and dwindling receivables while the smaller, independent franchisees and developers hid under their desks for 15 months. OK-OK, that’s over. Stock prices have rebound to previous highs, balance sheets are getting stronger and the independents are killing it. VPGs are higher than before the shutdown. Full down and cash sales are now common. Upgrades, referrals and OPC bookings are easier than ever before. People want to travel.
Yep, as discussed before, humans want to travel. And now they have plenty of saved up money and desire to do so…and they will. The low hanging fruit is being picked at a record pace this summer and our bet is that the fall brings more record breaking sales numbers. According to Dos Mundos Developments, the “current pace of tour bookings and sales volume increases is starting to reach pre-2008 levels, which were records in their own right”. For developers carrying notes, the much feared increase in defaults never materialized and in fact, more notes were paid in full during Covid that the previous 12 months. So, be careful what you asked for a year ago.
You asked for it and here it is. Things have bounced back and bounced back fast (as we knew they would), but this has brought to the surface other issues. The current environment is almost at panic stage for hiring quality people. Management is stretched thin, sales teams are working over-time to keep up and good sales staff know they can leave any day and get hired twice at other resorts before the sun sets. Marketing teams and contact centers struggle to find enough quality staff to keep the phones answered. As government subsidized benefits, of all kinds, dissipate, your marketing and sales folks will be back…and they will be hungry…so get ready. Our affiliate contact center at TCCS lost and could not replace more than half its agent positions over the last year. Good timing though. New technology and processes were put in place that makes the booking, package sales and confirming process much more efficient and less “human” intensive. The best is yet to come for travel, timeshare and resort sales teams.
For mor no-nonsense resort management stuff, contact Chris Bounds directly.
International Timeshare, Fractions & Travel Clubs
If there are no pros AND cons in a decision process then no decision is necessary. This is especially true when considering the purchase of a Fractional Resort Home, Timeshare or Travel Club membership that is domiciled outside the US. We have heard all the stories about great deals AND about big time rip offs related to resort stuff around the world. Yep! My favorite story line is; “OMG, they kidnapped us and locked us in a sales meeting and tricked us and gave us food that made us throw up and laughed at us and the contract we signed was not legal and they would not refund our money and THEY DID ALL THIS IN SPANISH!!!”
We have heard this story to many times. Mexico is a third world country. You get that… right? They have different laws. You are a long way from home. You don’t speak the language and you don’t understand the culture or customs. Even in the States you can get hooked up with less than honest timeshare and fractional folks. Don’t blame it on Mexico or on “Those Mexicans”. You got a 6 day vacation at an all inclusive, 5 Star resort right on the beach for the entire family for $299. What were you thinking? How is that possible? Are you stupid? Really, ask yourself, “Why would someone sell me a $2,700 vacation for $299? ” So then you answer yourself, “Well its because I am a SMART gringo and these dumb Mexicans are going to lose money on me because I am not buying their timeshare”.
Well you are the stupid one…admit it. Just like in the States, there are good and bad players in every industry. Although in Mexico & around the world, the laws regarding timeshare and fractional ownership have come a long way in the last 20 years, you still do not have much recourse if something goes wrong. Also, if you are thinking you can go somewhere, sign some papers and put a down payment on your credit card, only to cancel and request a charge back when you get home to Cleveland, think again. You are now the con-artist, liar and “pinche gringo” and will find that it is not that easy. So, just be reasonable. There are many great timeshare & resort club operators on the planet including Real Group, Anantara, El Cid, Azure, and Playa Resorts as well as many large US companies selling and servicing timeshare under foreign branded names or companies. Do your homework. If you are trying to get a ridiculously cheap vacation anywhere you should be prepared to get what you pay for. List and understand the Pros and Cons.
According to Dos Mundos Developments, many large, global banks and other providers, service timeshare notes & stick to GAAP principals and the documentation is fairly standard. You can get some absolutely great values on timeshare and vacation club memberships at truly outstanding and luxurious resorts from Paris to Bora Bora to Venezuela but you have to be smart.
And if you are not smart, don’t also be naive. An easy way to take advantage of the Pros and Cons that have already been vetted by a global leader in the resort business is simply buy points from RCI. (Resort Condo International). Let them do the work and you just enjoy your vacations.
For more no-nonsense resort stuff from Chris Bounds, visit his site.
February 23, 2017 33 Comments/in Blog /by terrychristopherbounds.com
Manage your managers! Seems straight forward, right? WRONG. Its not easy. Its hard. Its time consuming. It gets complicated. It has to be done. Goals, accountability, reporting, timelines, budgets etc don’t just get done if not managed. Chris Bounds, Austin, Texas offers the following:
#1 Ethical Sales will cure most other issues. Lets be clear, its all about sales. Sure, someone has to decide when to order more copier paper and yes, it is sad that Rick’s father is dying from cancer and that the swim up bar at the adult pool has a cracked mirror; yeah those things must be dealt with BUT don’t let life’s distractions cloud your vision of what the goal is. Don’t stay busy all day doing things that don’t show up on the bottom line of the quarterly sales report. AND, don’t let your managers do it either. Is it coincidental that record setting sales figures seem to make it much easier and more pleasant to deal with life’s issues? I think not! SO & THEREFOR, never, ever let your management team get bogged down in stuff that has nothing to do with sales. NO, no excuses; just don’t let them do it. Try this for 3 months and watch what happens.
#2 Shift the focus of the time you spend with managers. With sales reps, you’d (hopefully) spend your time digging into the details of their sales production. But with your sales managers, you must dig into the details of their management. For example, in a review with an individual salesman (Bob), you might say, “Lets review your 30 day sales efficiency on X”. But with a sales manager, you would say, “How are you working with Bob given his 30 day sales efficiency report for X” Or rather than asking, “How could Bob have done Z better?” you instead should ask, “How could you have managed Bob to do Z better?” Make your managers answer these questions. Make them study and be accountable for their answers. This will bind the team and give them ownership of the process.
# 3 Know that you’ll teach by example, whether you want to or not. When you’re managing all phases of a project or development, you’re probably not real concerned that the kitchen staff sees you out of your professional dress when you snitch a cup of coffee on your day off. But when you’re managing managers, you and your behaviors, dress, habits, language etc., matter 24/7. REALLY. What they see, and so perceive of you, is what you are going to get back – and that can be good or bad. If you’re delegating effectively, providing useful and regular feedback, conducting useful check-ins, hiring wisely, and fairly holding all staff accountable, that’s what your management team will do. Conversely, if you tell one of your mangers that he can hold a pender over and close it the next month so he can get his Christmas bonus, then you just told him (and his piers) that cheating and breaking the policies is ok.
#4 Feed the tigers, ride the horses & shoot the dogs. It is very important that the sales mangers you manage, although operating fairly, for everyone, by the exact same policies and handbook of rules, understand that at the end of the day SALES is what we do. We do them ethically, straight forward and do not cut corners or skip any procedures, BUT our job is to sell. When managing a fast paced, high energy sales organization fairly and according to stated goals and budgets, your managers’ recipe must call for: #1. Feeding the tigers: give more leads, tours, and prospects to the #1 salesman/manager/team. The #1 seed in a tourney gets the #8 seed for first game. That’s just how it is. Make your rules and policies match. #2 Riding the horses: We don’t ride pigs or cows. No, we want horses and when you have a horse why would you keep a pig or cow in the stable for riding. Horses are for riding, so when your salesman/manager/team is selling well, do not quit riding. Big mistakes are made when the top team is broken up because of promotions, lateral moves or reassignments. #3 Shoot the dogs: we don’t want dogs in our stable; it creates chaos. When a team/manager/salesman is just not performing and not performing consistently, despite your focused efforts, then you must train your management team to get the dogs out of the stable.
#5 Quick, fair & public trials: Nothing quite like a public hanging to get your attention and help you understand that rules must be followed and that the results of actions will not be dealt with in secrecy or privacy. Not withstanding proper adherence to employment and privacy laws, your mangers should see, know and understand that all matters, good and bad, will be dealt with immediately and in a fair and open forum. Showing managers that it is OK to post the weekly sales reports and comment openly on efficiency numbers is a good thing. There are no secrets in sales numbers. They are exactly what they are. No excuses, no what ifs and no where to hide. If you are second place by $0.50 then you are second place. Your management team must have the confidence to openly admonish wrong behavior and reward good behavior. Actively treating managers with this same philosophy will trickle down.
For more NO BS sales management stuff, feel free to contact Chris Bounds, Austin, Texas.