The white sand beaches of Florida’s Panhandle have long been a lure for vacationers. Now some of its condo hotels, which went into free fall when the recession hit in fall 2008, represent opportunity for Atlanta-based hotel management firm Hotel Equities.

“These same banks foreclosing on hotels also have opportunities with failed condominium projects,” says Fred Cerrone, Hotel Equities president and CEO. “We felt with our management expertise and award-winning talent we have a lot to offer.”

Barry Stewart

So last month, Barry Stewart was appointed head of a new condo hotel management division. Before that came together, he and Angie Straub, Hotel Equities’ director of business development, traveled to the Florida resort of Destin to talk to banks and realtors. The fieldwork told Stewart hotel management expertise in that region is just what the doctor ordered.

In one scenario, a bank has taken over a failed beachfront condominium project where unsold units could be converted to a hotel. Another might involve a condo whose tenants are unhappy with “the amount of times their units are being sold.” Hotel Equities could take over the rental program.

“When we come into a 100-unit project and have 50 under our hotel rental program, the goal is to increase the revenues on those 50 units for [the other 50] to come on board,” Stewart says. “That’s why even within the same project there’s an opportunity for growth in revenue.”

The politics
One of the issues in managing condo hotels is dealing with a large number of individual owners. Stewart doesn’t see that as a problem, however.

“What’s more typical in a project is one entity that controls a number of units would effectively give us a great starting point,” he says. Once Hotel Equities has a foot in the door, it should be relatively easy to convince individual condo owners it can “bring more revenue in on units we manage as opposed to the ones managed by various and sundry other operators.”

Stewart says Hotel Equities would recalibrate the project to “make our guests feel like they are coming to a hotel. When you rent a house or condo, there’s a kind of uncertainty in the product you’re getting. Is it clean? Do you need to bring your own linens? We want to remove that.”

Complicating the picture: the condo association and the legal structure. Hotel Equities, ideally, would run the associations, too, Stewart says, noting it is prepared to participate in homeowners’ meetings and accept responsibilities for building maintenance. “One of the things we’d have to do differently in a condo hotel is actually track revenue per unit. In a hotel, we might look at what room 101 brings vs. room 301, but it’s not as critical.”

Why now?
While some hotel brands offer related skills, Hotel Equities targets markets others overlook. Marrying condominium expertise and hotel expertise is the management gap Hotel Equities hopes to bridge. It’s in the prospecting phase right now, Cerrone admits.

Besides the Panhandle, Myrtle Beach, SC is a target market.

“A lot of these smaller projects are operated by ma-and-pa types,” he says. “They may have a real estate company, and this might be a side thing for them. Oftentimes, it’s in a very attractive setting, but it just needs to be marketed and managed properly.”

What got these wheels rolling was a retreat that brought Hotel Equities executives to a 200-room beachfront condo hotel in Destin two years ago. The place was beautiful, “but the management was very spare, so we ended up doing our own thing,” Cerrone says. Hotel Equities booked about 80 rooms. “You’d go by the desk and ask, where are some good restaurants, and they’d look at you like you had three heads,” he says.

Several Hotel Equities managers-in-training complimented Cerrone on his retreat pick, adding “too bad it wasn’t run by us.”

“We’re talking about projects that are already in existence,” he says. “We’re coming in and basically fixing them.”