As some of you will no doubt have figured\nout by now, I have a weakness for cars. \nOld cars, new cars, fast cars, slow cars, even electric cars and the\noccasional motorcycle. I am fascinated by cars and the auto industry. This\nbasic flaw in my good judgement has led to me investing wisely in a few\nvehicles, much to the dismay of the managing director. By wise investment I mean spending more than\nsaid vehicles will ever be worth and then justifying the \u201cinvestment\u201d by\ngrossly overinflating the values when debating the matter with my accountant,\nbank manager and afore mentioned MD.<\/p>\n\n\n\n
My love of cars is primarily centred around\nnew, fast and flashy and old, restored and beautiful. I am less a\u2019mored with\nrusty old dungers that, with a bit of love and thousands of dollars, might some\nday run and be worth a few dollars. The\nmarket for such \u201ccollectibles\u201d is flaky at best albeit there are plenty of\nvendors out there trying to make a fast buck selling a substandard vehicle that\nhasn\u2019t been maintained at a top dollar price.<\/p>\n\n\n\n
One of the biggest gatherings of classic\ncar and lifestyle enthusiasts takes place in Coolangatta on the Gold Coast in\nJune each year. Cooly Rocks On is one of the biggest festivals of its sort\nanywhere and well worth a look. We have been going for the past 5 years and we\nalways stay in the same high rise and always in the same unit. Being a high demand event tariffs are pretty\nsteep and the investors in the area no doubt enjoy a great return. This is as it should be.<\/p>\n\n\n\n
Sadly, and like the car vendor who tries to\nsell a sad old classic at a restored price, we have watched the condition and\npresentation of our favourite unit deteriorate over the past 5 years. The trend was evident early on, but the\nposition and view are so sensational that we chose to overlook the falling\nstandards and rebook each year. There\nis, of course, a tipping point where all the beauty and ambiance of a location\ncannot compensate for a tired and unloved apartment. I reckon we have a real\nchallenge looming with some of the most magnificent tourism destinations in the\nworld underpinned by some seriously tired and decrepit accommodation\nstock. The challenge is amplified by the\nfact that much of this stock is management rights based with resident managers\nhaving little control over the capacity or desire of individual owners to keep\ntheir apartments up to a suitable standard. \nIn the case of the property I have mentioned above all that is required\nis some fresh paint, some new furniture, more regimented cleaning standards and\nan eye for detail. Presenting an apartment at $500 per night with cigarette\nburns in the dining chairs is not a good look!<\/p>\n\n\n\n
Of course, there are many apartments that\nneed a whole lot more than paint and carpet. These days travellers,\nparticularly in the leisure sector, expect standards similar to what they had\nat home. Back in the day that was\neasy. No one I knew as a kid had a\nswimming pool so any motel or holiday flats with a pool was immediately top\nshelf. Now everyone\u2019s got a pool, a big\nTV in every room, a gourmet kitchen and a Kim Kardashian signature bathroom. Ok, I made that bit up.<\/p>\n\n\n\n
What to do?<\/p>\n\n\n\n
Well, if you\u2019re lucky or a very gifted\npeople manager you will have investors in your property who see the value in\nkeeping their apartments in tip top shape. \nYou will keep them constantly informed of guest feedback and encourage\ntweaks and fine tuning to ensure return patronage and a reduced reliance on\nOTAs. For the rest of us here\u2019s a few\nideas:<\/p>\n\n\n\n
Room Grades<\/p>\n\n\n\n
Not a new idea and well managed by many of\nour clients. Simply create room standard levels and sell your inventory\naccordingly. You know the game, Deluxe, Superior, Standard, Awful etc. I\nthink the bit some operators miss is keeping owners informed of where they sit\nin the room standard ranking and how little it might take to jump to the next\nlevel. A bit of data on improved returns\nwon\u2019t hurt.<\/p>\n\n\n\n
Refurbishment Examples<\/p>\n\n\n\n
Again, not a new idea but always worth a\nmention. Find an owner who is prepared\nto do a renovation and work with them and their trades to monitor the project\nand costs. With the owner\u2019s permission share the design, costs and outcome with\nother owners of unrenovated apartments. I\u2019ve seen this strategy managed to\ngreat effect where the manager engaged an interior design and project\nmanagement company to do up refurbishment plans and costings for individual\nowners as part of encouraging investment. \nWhy wait for an owner to think about a reno when you can encourage the\nprocess from the outset?<\/p>\n\n\n\n
Lease Backs<\/p>\n\n\n\n
Yet another not so new idea. Lease the apartment, do your own reno and\nhope that the return over the lease period makes more than a standard Form 6\nwhile paying back the renovation investment. Not for the feint hearted,\nparticularly when hard costs such as bathrooms and kitchens are taken into\naccount.<\/p>\n\n\n\n
Sack the Owner<\/p>\n\n\n\n
Again, not for the feint hearted but, if an\nowner simply refuses to upgrade a unit there may come a time where the guest\nexperience will have an unacceptable negative impact on the entire property. I\nhave been surprised by the number of times resident managers employ this tactic\nand find that it\u2019s just what\u2019s required to get an owner to spend some money.<\/p>\n\n\n\n
Renovation Funding<\/p>\n\n\n\n
A hot topic at the moment and we have had\nsome pretty interesting discussions with niche lenders trying to come up with a\nworkable model. Unlike a hotel or motel\noperator who owns or leases the entirety of their property the management\nrights owner has no direct control over the interior presentation of units.\nMore importantly they have no mechanism for borrowing money against those units\nand using the funds to do upgrades and renovations. On the flip side many unit owners either\ncan\u2019t be bothered or don\u2019t have the financial capacity to undertake upgrades,\nparticularly for bigger ticket items like kitchens and wet areas.<\/p>\n\n\n\n
Discussions have taken place around a model\nin which the manager would fund refurbishments via a niche lender debt funding\nfacility with repayments coming from letting commission retained. The obvious challenge here is that the owner\ncould terminate the letting appointment leaving the manager to pursue debt collection\noptions which would almost certainly prove a nightmare. I am also concerned that such a debt facility\nmay cause concern to the resident manager\u2019s primary bankers.<\/p>\n\n\n\n
A more appealing option, albeit still to be\nfleshed out, would be a niche debt facility provided to the owners as a group\nand repaid via the resident manager from a portion of letting commissions. The liability would be carried by the owners\nwith the facility working in a not dissimilar fashion to current well accepted\nstrata lending for common area works. \nThe challenge is to take common area debt funding standards and make them\nwork for groups of owners. Watch this\nspace and please feel free to offer any suggestions.<\/p>\n\n\n\n
In closing I know you\u2019re wondering. Yep, we rebooked the same unit at Coolangatta\nfor next year. We have suggested to the manager that the owner give it a\nfreshen up\u2026\u2026\u2026\u2026.time will tell.<\/p>\n","protected":false},"excerpt":{"rendered":"
As some of you will no doubt have figured out by now, I have a weakness for cars. Old cars, new cars, fast cars, slow…<\/p>\n","protected":false},"author":1046,"featured_media":1359,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_mbp_gutenberg_autopost":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1358","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-and-finance"],"_links":{"self":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/1358","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/users\/1046"}],"replies":[{"embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/comments?post=1358"}],"version-history":[{"count":1,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/1358\/revisions"}],"predecessor-version":[{"id":1360,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/1358\/revisions\/1360"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media\/1359"}],"wp:attachment":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media?parent=1358"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/categories?post=1358"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/tags?post=1358"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}