CHMW became involved with this property when Frenchman’s Reef was purchased as part of a portfolio acquisition and while viewed with a higher risk due to its location, Frenchman’s Reef promised significant upside potential. The Resort, encompasses ±17 acres, was comprised of a main tower building and cottage-style villas. During due diligence, it was clear that an opportunity existed to modify the Resort’s operating model to improve performance. Under the existing operating model, the property generated more profit in the first four months than it did on an annual basis, and so CHMW formulated a strategy to minimize losses during the off-season. We were able to seasonally “shrink” the hotel to approximately one third its size, close the laundry operation at Morning Star, and reduce the operating hours of several food and beverage outlets; this allowed us to increase revenue through rate compression while minimizing operating costs significantly between August and October, with little to no impact to overall guest satisfaction and/or compromising brand standards. Implementation of the off-season resort closure plan created an average savings over the three-month period of $800,000 annually. Other examples of value enhancement through operational initiatives included a food and beverage profitability analysis by which CHM identified opportunities to improve departmental profitability by 20%, as well as capitalized on the opportunity to lease excess space. We also materially altered the sales strategy, including improving the fee/value relationship derived from the regional sales force, revamping the on-property sales team structure, and retooling the approach in which wholesale business was managed.
Implemented $5.5 million annually in operational initiatives over the course of the ownership period, including significant reduction in hurricane insurance premiums through hurricane mitigation plan.
Operational Asset Management
- Negotiated Integration Agreement with Marriott Vacation Club International (MVCI) including sales center and shared services/costs. In total, there is an estimated $12 to $15 million in additional hotel value as a result of the Integration Agreement.
- Performed condo-hotel analysis of Morning Star Resort and casino analysis for the Main Tower in preparation of a sale.
- Subdivided and sold adjacent land parcel for development of a 182-villa Marriott timeshare project.
- Sold resort in June 2005 resulting in a 20% improvement to value.
Capital Planning & Oversight
CHMW oversaw several capital projects including installing complete hurricane suppression shutters, converting to island power, developing a reverse osmosis water treatment plant, and outsourcing the Resort’s wastewater treatment plant.