Officials see potential in ‘condo-hotel’ model
December 19, 2013
In order to keep pace with newer ski resorts, Aspen will need to improve its rental-market inventory.
That was one of the takeaways from a lodging tour Tuesday, when city officials visited the Viceroy Snowmass and various condos around Aspen. One important statistic revealed during the trip was that 95 percent of residence owners at the Viceroy rent their units out. With 152 available units, 56 have sold and 53 of the owners rent, while the unsold units serve as hotel rooms.
In comparison, Frias Properties of Aspen, which manages units at 36 different properties, sees less than 50 percent of its condominium owners renting. Managing partner Chuck Frias said one problem is that Aspen's product is not as relevant as it used to be.
"It's just a matter of bringing them up to modern standards and competing with newer resorts: Viceroys, Base Village in Snowmass, Four Seasons in Vail … other resorts that just have newer inventory," Frias said. "By and large, our inventory was built in the late '60s, early '70s. It was a different time, so the units are just a little bit smaller. Back then, the needs that people had were different, and … the marketplace has changed."
Assistant City Manager Barry Crook — joined by Aspen Mayor Steve Skadron, Councilman Dwayne Romero and city planners Chris Bendon and Sara Adams — said he was impressed with the Viceroy's "condo hotel" model. He said people are more likely to rent out a hotel unit than a customized condo.
"If it's a hotel and it's sold as a condominium, to me … that's the model you ought to be incentivizing," Crook said.
Recommended Stories For You
Lisa Price, director of sales at the hotel, attributed its success largely to the hassle-free nature of owning the units. She said that when owners are out of town, they don't have the same worries as a condo owner.
Bendon said it's important to note that the residences are whole-ownership units, something that appears less frequently on the Aspen rental market.
While Skadron was impressed with the overall success at the Viceroy, he said it can't be replicated in Aspen, given the scale of the operation. At the same time, he said, certain lessons can be learned in terms of room size and the family-oriented nature of the hotel.
The officials' next stop was The Gant in Aspen, where general manager Donnie Lee told them that 85 percent of his owners rent out.
"The reason The Gant functions well and we can maintain our rental activity is we lean on our homeowners pretty hard in terms of maintaining their units," Lee said. "And they've responded in spades, generally speaking."
With Web-based booking, Lee said, the world has become much smaller and consumers can find the biggest bang for their buck. By keeping the units at a modern, premier level, the product remains relevant. As Councilman Adam Frisch, who joined up at The Gant, said, "The larger the units, the nicer the units, the higher the occupancy."
Lee estimated that a $300,000 renovation project would take about seven years to recoup, and if construction is done right, a unit can retain its status as a premier rental for more than a decade. But instead of standardized, hotel units like the ones at the Viceroy, the residences at The Gant are fully customized.
Frias, on the other hand, said he can't justify asking a condo owner to throw hundreds of thousands of dollars at a renovation project, knowing the return is minimal. For him, the first question from an owner is, "How quick is the return?" He seemed skeptical about a seven-year return and added that if his owners go through with renovations, it's to suit their own needs.
Frisch said that in addition to Aspen's lodging product becoming less relevant, there's a demographic problem with baby boomers reaching an age where they ski much less.
"It's a demographic bubble," Frias agreed. "We started looking at it 30 years ago, saying, 'This is going to be coming when all of our baby boomers age. All of a sudden, we're going to lose a lot of our base of skiers.' And that's exactly what's happening."
Bendon said the city's goal is to make sure that lodging is sustainable in the long term, inventory that will attract people to spend their money. Frias said future customers are the 20- and 30-year-olds making ski trips to Aspen.
"Almost all the owners of these condominiums — many, many of them came on a college ski trip," he said during a tour that included the Alpenblick, the Fasching Haus, the Hotel Durant, the Chateau Chaumont, the Chateau Dumont and the Glory Hole Condominiums. "So it's important to get those kinds of groups. It's important to have that diversity of lodging … if you can get ski clubs, if you can get college groups, so they look at Aspen like this is our place. It's not our parents' place. It's our place."