ReSORT LAW

Outsourcing Resort Management

May 2004

By W. John Funk*
for Developments Magazine

The vacation industry is subject to the same economic forces that affect other businesses. Management must face the question: “Is our organization best suited to provide a service in an efficient, cost-effective and profitable manner or should it be outsourced to a specialist?” This question is relevant whether the company is a developer or an owners association. It is especially important in the area of resort management.

No resort can be successful unless three elements are present. First, there is the development project itself—the physical presentation of a vacation concept that creates an emotional bond with the vacation owner. The buildings, the units, the furnishings and color schemes and the amenities embody the development team’s vision of the vacation experience it wants owners to enjoy. Next, the sales team must convey the vacation concept to potential purchasers and join their individual wants and needs with the developer’s vision. The sales staff creates the relationship with the owners and the expectation of a promised vacation experience. Lastly, the resort management team fulfills that promise and enhances the relationship with the owners. Each is important, but since vacation ownership is a lifetime commitment, resort management is the key to long term success.

Effective resort management depends on five factors: quality, competence, reliability, efficiency and communication. The service has to be excellent; the personnel must be skillful and supported by the proper tools to do their jobs; the work must be consistent and timely; the cost must be reasonable and the vision of the resort must be embraced by the management team and reinforced with the owners. Doing the job right involves a significant investment of capital and management time.

Arguably, there is no inherent advantage to resort management being performed on an insource or outsource basis. Put it this way, you need the same capital equipment and personnel to provide the service. Each organization must evaluate whether it is better suited to perform the work with its own staff and resources or to hire the services of a company that specializes in resort management. In some cases, a specialist may bring economies of scale, expertise and experience to do the job better.

The process of evaluating your capabilities is called “due diligence.” This term connotes making certain that you are aware of the true nature of your resources and staff and have looked objectively at your strengths and weaknesses. Any company that specializes in resort management would do the same thing in making a proposal — it wants to make certain that it understands your resort and has complete knowledge of what needs to be done to provide the level of service your owners expect.

Due diligence breaks down into several categories. The analysis concentrates on governance, administration, housekeeping, buildings and grounds, finances, customer relations and exchange program relationship. The following are examples of the types of matters to be considered.

Governance involves the legal relationships that govern the resort—who has the decision making authority, what approvals are necessary to take action and whether there is a clear understanding of the vision of the resort and customer expectations.

Administration involves accounting, record systems, compliance with resort legal instruments, compliance with federal, state or local laws and regulations, documentation, human resources management, technology, office equipment and other back office concerns.

Housekeeping involves the cleaning and supply of units and recreational amenities.

Buildings and grounds involve the physical state of the real estate, furniture, fixtures, recreational facilities, roads, parking areas, sidewalks, landscaping, machinery, utility infrastructures and telecommunications equipment, routine maintenance, capital improvements and security.

Finances involve the financial condition of the resort, records, budgets, revenue, expenses, collections, internal controls, audits, taxes, reserves, relationships with financial institutions, deposit accounts, and lines of credit.

Customer relations involve front desk services, reservation and rental services, newsletters, owners meetings, information services, transfers of vacation interests and recreational activities.

Exchange program relationship involves maintaining or improving the classification of the resort in the exchange system.

Once the analysis has been completed, you are in a position to evaluate whether and to what extent your organization is achieving the five factors of effective resort management. You will know what it is actually costing and whether it is fulfilling these goals. You will then be able to compare proposals from companies that specialize in offering such services to determine whether it is better for your owners to insource or outsource the services.

It is important to recognize that whatever the choice, effective resort management begins with a clear understanding of the resort vision and the expectations of owners. They guide all management decisions and set the standard for success.

*W. John Funk is admitted in New Hampshire, Vermont and Massachusetts.

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W. John Funk
You may contact
John Funk at 603-545-3607.

Related practice area:
Resort Law