Hoteliers warned of room sales pitfalls

UK hotel operators looking to follow the innovative room-sales lead of hotel operator GuestInvest were warned of the potential pitfalls last week at the International Hotel Conference in Monte Carlo, Monaco.

Following GuestInvest's purchase of the Alias hotel chain, the UK looks set for an explosion in the firm's timeshare-like model whereby individual investors buy a hotel room in which they can stay for a set number of nights a year and receive a share of the profits from letting it out at other times.

However, if this is poorly managed, the result can be "a nightmare" for the operator, said Berno Feuring, of German hotel development firm Feuring.

Feuring pointed to the example of the Scandic hotel in Frankfurt, which had tried a similar scheme. Problems emerged when the operator needed to renovate the hotel. With hundreds of separate owners, it proved impossible to get approval, and eventually the operator was forced to buy out the individual owners to regain control of the hotel.

"If just one owner has not agreed to proceed in one direction or another, then you are blocked," said Feuring.

Martin Armitstead, director of hotels at property consultant Colliers RH, also urged caution. "It's a very good short-term solution to funding hotels, but you can build up liabilities for the future," he said. "Another issue is how you distribute the income."

Armistead questioned what would happen if one room was let out for only a few nights while another was constantly let. He also highlighted the potential problems involved in providing investors with income guarantees.

Analysts agreed, however, that there was merit in the scheme - if it were properly managed. They also expected more hotel operators to follow the GuestInvest model when suitable financial packages, similar to mortgages, became available.

Source: Caterer & Hotelkeeper magazine, 28 October 2004