IT IS TRAGIC TO SEE INTELLIGENT BUSINESS EXPERTS THROW ALL CAUTION TO THE WIND AND BLOW THEIR BRAINS OUT WHEN DEVELOPING A RESORT.
Acting as we do as the first line of defence in a developer's quest for financing, we see the best and worst of the World's Developers and their very obvious blinders and blunders.
There are a couple of wonderful TV shows on the television in the Americas and Europe that deal with entrepreneurs pitching their projects to a panel of experts. Questions are asked and the entrepreneurs have but a few minutes to gain the interest from a panellist and obtain the investment directly.
Here is a cynical look at the hard work of many an entrepreneur and where many of them seem to go askew.
- Great Idea! Let's just do it! We have decided we have this great idea and we need your money to back our risk, no questions asked. Appealing to my sympathetic ear because I know resorts, the developer fails to realize that the investors & lenders want independent advice and proof from experts that the project will work.
- Find me a partner, quick. Isn't it funny how developers look for partners when they really need a lender or they are looking for a lender when they really need a partner. Yes the Capital Stack is part of the financial architecture and it takes as much expertise to structure the Capital Stack as it does the Chimney Stack. Some owners & developers fail to realize that they don't need to give up valuable equity to get the financing. On many occasions we can structure the loans to preserve the equity.
- Yup, we'll create our own brand. No need to pay those Big-Boys a ton of fees when all we need to do is create our own. We have this idea for a Spa and we have already designed the name and logos. The reality is that your brand will need to have name recognition in the geographical markets that feed your property..........plus 14 other critical components.
- Hurry, the World Cup is coming in 2 years. The Prime Minister has asked us to hurry our plans along and build the hotel for the World Cup. It is coming in two years........for two weeks! Hotels & resorts have been built for the Olympics, a Convention, the Pan Am & Pan Asian games and countless other lousy excuses. They need to be planned for 2 decades of success, not 2 weeks, but why would the Prime Minister care?
- Just sell it. A property ready for development has the plans bought and paid for, approvals in place, an operator ready to take it on and everything ready but he tells his Broker, 'sell it', not realizing that if all is ready, develop it and then sell it for a multiple of what he would sell it for now.... but why would the Broker care?
- Need grocery money too! Know how to make a small fortune in the resort industry?Start with a large fortune!! Yes, many spend their whole fortune on architects, plans, approvals and glitz and then start looking for the financing but are so desperate that they need not only the $75 million but some extra for the groceries but why would the architect care?
- I want it now, not in 3 months. Faced with the reality that it takes 3-4 months to source the financing and having spent three years already looking, there is no patience to take the 3-4 months necessary and do it properly.
- My cousin did the Study & it works. So many developers do the projections and financial assumptions through close friends or family or even the village accountant not realizing that the capital sources will want to have a recent study done by an independent, recognized Consultant company and that the value of one done by someone close to the developer has zero credibility but why would the village accountant care.
- What's wrong with 50 rooms & 2 restaurants? Do we really have to explain!!
- Where's the budget? No sir, a Construction budget is not a development budget!! So many developers prepare a detailed construction and fit-out budget not realizing that a full development budget contains many other line items which will have to be covered. For us, this is a clear sign that we are dealing with students.
I make my wife furious when I go to the Doctor and offer my own diagnosis!! I think this situation is somewhat similar. Allow the specialists the freedom of telling you if your property will live or die and listen very, very carefully. The fortune you lose may be your own.
Here then summarized are my TOP TEN TRENDS as Myths,
- My ideas, your money and your risk.
- Money is just money.
- Creating a brand is simple stuff.
- Special Events are profitable.
- Sell low so others can benefit.
- Spent it all. Nothing left to finish.
- Patience is not needed for financing.
- Independent consultants are credible.
- Hotel restaurants make money.
- Partial budgets are cheaper.
For any and all enquiries on financing of hotels and resorts, consult a specialist and make sure that you have all the financing before spending on anything.
For further information contact firstname.lastname@example.org or visit Axis Hotels & Resorts