Timeshare & Branded Residence Budget Development

Successful budget development and leadership of timeshare design projects is a necessary core activity for every Operator to keep HOA’s happy and individual properties desirable, attractive and functioning properly. Whether it’s a new construction or a renovation project, it’s your key to maximizing continued and future sales and it’s also crucial in keeping each individual owner proud and satisfied with their investment.

The motivation to undertake the renovation of an existing timeshare property comes in many forms. Perhaps it’s a re-flag from one brand to another due to acquisition, or perhaps it’s a repositioning of a property which is in one market position and Ownership wants to change or even upgrade the property to a new market position. It can also be simply the ongoing annual updates within the routine maintenance program of a property.

In all cases, the success of the project and the achievement of the desired results can be won or lost by how the project budget is developed and how the process is managed.

On the surface, my role is that of an interior designer. Seems simple enough, right? Pick a carpet and some upholsteries, select a few decorative light fixtures, refinish a few casegood pieces and we’re done. Well, not quite.

My actual role and that of my design teams here at Clear on Black is first, to ask questions. Good questions. Questions which help us to understand the desired outcomes and define all of the variables at play (e.g. a soft goods renovation of all guest villas, or the renovation of the Owner’s Lounge and all the public spaces). But deeper to these is our ability to determine and manage the expectations of all Stakeholders – the Operator, the Owner, the HOA board and each of the villa owners, the housekeepers, the engineering and maintenance team, and especially the sales team. Everyone has a voice and everyone should be heard.

One of the major problem areas I see, which if caught early can be organized or adjusted or redefined so that the project is successful, is the proper development of the project budget. Each property has (or should have) an ongoing annual reserve budget which covers all costs related to the upkeep of the property. These reserves are accrued and in place to cover all necessary R&M (repair and maintenance) work, upgrades, design changes, infrastructure updates, and numerous other items. Depending on the project size and complexity, the elements within the budget can range from simply the cost of the associated design fees and the cost of the FF&E and the related procurement, warehousing, shipping, sales tax, and installation, to highly complicated projects with complicated budgets which include numerous consultants’ fees, general contractors and subcontractors, general construction materials, permits, legal fees, entitlements, and so on.

Regardless of the simplicity or complexity, there are several budget-related factors which are best addressed from the outset.

It is crucial that when the project is envisioned, the full scope of the project be clearly determined and understood by all stakeholders. This means that all areas of scope are known (every area, every component). This is the place to get granular. If the project is a renovation, this also includes detailed quantities of FF&E, their distribution within the property, and whether any pieces are being re-used, re-purposed or relocated. It also includes all related take-offs of area scope items (such as square-footage, amounts of carpeting, wallcovering, paint, and drapery, etc.). Inaccurate counts or quantity take-offs can become serious budget issues if not done early and correctly.

Though this sounds counter-intuitive to some, disclosure of the budget to the design team is essential. Knowing crucial project parameters like budget allows the design professionals to make accurate, appropriate selections for the various items based on cost which fit within the project budget. Sharing the overall budget saves time because without full knowledge of the target budget, the design team could spend time making selections which are not in budget or of the appropriate quality level, only to have to reselect items and redesign work when the project schedule cannot accommodate such an impact. I would actually go so far as to say that if you aren’t tying the Designer’s contract to staying within a specific target budget and making their services a “design-to-budget” effort, you are doing yourself a dangerous disservice. Not disclosing the budget is the equivalent of not disclosing your expectation of the quality level. This would be like you and your driving-age son looking at options for his first car…is he is combing the internet looking at Porsche’s while you’re thinking Ford Focus? It saves a lot of time if you just tell him the budget!

Also important is the project schedule and the desired completion date. This can impact budgets in several ways. First, is your desired scope able to be completed within an allotted time? If you are trying to do too much work in too little of a span of time, this can end up in either a schedule bust, added costs for additional workforces (double-shift or triple shift, overtime costs), or increased shipping costs. Additionally, it’s important to determine if there are any constraints around a hard start and hard completion date. One important note is that because timeshare sales and the projected revenue are based on very specific opening dates and even the dates when the sales process can begin, if the completion date is missed, there can be tremendous impacts to sales and revenue, and there may be legal implications as well.

Who is driving the bus? Is there a long-term vision for where the property is going? Not all projects need to be part of a masterplan, but if you want your property to have a certain amount of change over a specific amount of time, then you need a plan. Virtually all timeshare renovation projects are segments. Because of limited funds and time, projects are broken into smaller pieces. If every year you retain a different designer (or worse, you do the work yourself) and you are thinking only in a one-year-at-a-time interval, you’re quite likely to have a disjointed, poorly functioning mish-mash of work. I’m a strong proponent of master planning. If you undertake a 3 or 5 or 7 year look-ahead, then your budgets become clearer, your HOA’s aren’t kept in the dark, and your planning and scheduling is more streamlined and you have a continuity of design which at the end of your plan makes for an attractive, intelligent and better running property. It takes only a little extra time and funds to think big and holistically, and the results are better for everyone.

What are the working times available for contractors and tradesman? If there are restrictions such as specific work days and times such as only weekdays and not weekends, or between 9 am and 4 pm, then the schedule is impacted as well as the budget because of the extended time required to have the work performed. However, on some projects the contractor actually has the ability to work multiple daily shifts, so seemingly impossible deadlines can be met though you may be paying a premium for that level of intensity.

Are all project areas physically accessible over the duration of the project? Are there vehicular access issues? Are there conflicting traffic paths between guests and construction workers? Is there a dedicated elevator for the renovation team which minimizes guest disruption? Is that elevator actually able to contain the goods being transported, or are the fancy headboard or cabinets too large to fit through the elevator hoist way?

How are the project budgets determined? More specifically, how are the costs determined for the various components and the related work? Are they based on known, researched, or previously purchased recent comparable projects, are they based on bids from legitimate vendors, manufacturers or tradesman, or are they outdated, unsubstantiated numbers hastily thrown together? One key aspect to be aware of here is, you can always get something cheaper, BUT, is it of appropriate quality (aesthetically and operationally) and does it meet the brand standard? We have one client who did a full FF&E renovation and had their resort filled with what turned out to be inexpensive and “cheap” casegoods and two years into what should have been a 7-10 year lifespan, the casegoods failed and needed to be replaced. And, if you should choose to go the “reinterpretation/knock-off” route, you may well run into intellectual property or copyright issues. More and more manufacturers and designers are taking a legal stand on this issue, and I don’t think it’s something to gloss over. I look at it this way – pretty consistently, you get what you pay for, so if you hire a qualified interior design firm and you get solid and dependable quality goods, you’ll be stacking the odds greatly in your favor. There is a reason premium goods carry a premium price. If your market niche is such that your owners know what quality is, provide them with it, particularly in areas they can touch and feel the product.

The HOA hew and cry of, “my cousin/brother/friend” can get “X” for much cheaper, or a board member is a self-proclaimed expert on construction or renovation. While there may be that rare board member that actually does have the bona fide credentials to actually weigh-in on budget or construction issues, it’s far more likely that the well-meaning “expert” just needs to be listened to and then appropriately managed by the resort manager or the senior brand management team so as not to become an impedance to the project’s forward momentum.

Early, frequent and ongoing review of the project budget as the project progresses. Things can change; issues can and will arise. You always want to be on the front end of this, not the back end without the time or resources to figure out solutions to issues. Weekly conference calls with your project team, including the Purchasing Agent to go over pending issues, un-resolved issues, hot topics and general ongoing status will go a long way to maintaining the accurate and timely communication flowing. Staying organized throughout the project will pay you huge benefits in your control and will minimize unwanted surprises.

As with virtually all aspects of design and construction, proper planning and paying attention to the right things will keep you running smoothly and achieving the results you want. By being aware of the points I’ve outlined above, and by building a team of experts, your project success will be infinitely easier to achieve.

Carl holds a B.S. in Environmental Design from the University of Colorado in Boulder and a B.S. in Industrial Design from Art Center College of Design in Pasadena, California. He is NCIDQ certified and is a licensed interior designer in the states of Nevada and Florida. Reprinted with permission, courtesy of Clear on Black