Islands Banca Cruises mulls franchise offers

By Ehda M. Dagooc Updated April 28, 2009 12:00 AM

CEBU, Philippines – Islands Banca Cruises is currently developing a franchise package offer to accommodate the increasing inquiries for trips to other islands in the Philippines.

“We are going to introduce our franchise package for Islands Banca Cruises soon. We are still finalizing some of the important details for this offer,” said IBC president and chief executive officer (CEO) Jay P. Aldeguer.

He said the brand itself has gained interest from capitalists all over the country, including those in Palawan, Boracay, and Bohol, among others.

Although, it is tempting for the company to operate its own Banca Cruise services in these areas, Aldeguer said franchising strategy is seen to be more effective in its expansion bid.

Currently, the company has set up its own franchising department, to pursue this opportunity for fast expansion and build a nationwide brand for Islands Banca Cruises.

The company has pioneered in professionalizing the services offered by the traditional island hopping activity.

Part of its innovation is to offer deluxe services to island hoppers, providing comfort on board a traditional “banca”.

A banca is an archetypical Philippine boat, fundamentally, a sturdy, deep-hulled outrigger canoe designed primarily for inter-island transport. Despite being very simple, almost rustic, a banca is a stable, reliable and fast vessel.

The modern Islands Banca , on the other hand, is a more streamlined, elegantly styled, and efficient version of the traditional motorized banca, fondly called a "pumpboat." It combines the versatility and speed of a classic banca, with the convenience and reliability of modern transport and travel.

According to Aldeguer, the franchise package which price range is still being finalized, will also including providing the branding and marketing technology effectively adopted by the company in its one-year operation.

Recently, the company announced that it infused fresh capitalization of P3 million to boost Cebu’s positioning as the island hopping destination in the Philippines

The investment include; acquiring of new five boats, aggressive marketing promotion for both local and international markets, and expanding its “mini-call center” facility to accommodate the growing daily booking transactions.

Aldeguer said the potential of expansion for Islands Banca—kind of service offering it’s tremendous in the Philippines. Now, that the brand has become quietly established, offering a franchise package could fast tract the company’s bid for nationwide expansion.

Unlike the traditional pumpboat ride, Islands Banca offers beverages, light snacks, and toiletries and Spa (service) on board, with comfortable bean bags. It also offers water-sports equipment for rent.

Islands Group introduced the Islands Banca Cruises in summer of last year with an initial investment of P2 million. Aldeguer said the potential of Cebu becoming the island destination in the country is overwhelming, thus the company is now maintaining eight boats or “banca”, and by peak of summer vacation in May, it is looking at adding two more boats.

OFW remittances, BPOs sustain Cebu economy

By Ehda M. Dagooc Updated April 25, 2009 12:00 AM

CEBU, Philippines - The steady flow of remittances from the Overseas Filipino Workers has helped buoy business opportunities in Cebu amid the global financial meltdown.

The remittances as well as the high paying jobs offered by the Business process Outsourcing companies helped Cebu, which is the center for trade and commerce in the Visayas, sustain a vibrant economy.

Economist Ramon M. Quesada cited top progressive industries that offer good business prospects for entrepreneurs, which include agribusiness (corn), banking, BPO, education, entertainment, franchising, personal care, IT, local tourism, sports, health, infrastructure/utilities, telecoms, transportation, among others.

Consumers across social brackets are spending more in personal care, specially those consumers who are in the lower brackets. This has made some personal care companies thrive amid the financial difficulties.

Quesada mentioned that based on a report from the National Statistics Office (NSO), lower income consumers such as those who are earning from P100 thousand a year to P249 thousand and below are spending more on personal care rather than on medical expenses.

Ironically, he said personal care and other cosmetic products are still one of the promising business opportunity in the Philippines, specifically down the Southern part of the country, as consumers are not letting go of their “vanity” needs, despite the crisis.

Quesada said the upper A and B markets pay strong attention for medical concerns, such as buying wellness and medicinal products, rather than spending more on personal care.

“The A-B market are not too vain to take care of their looks, they are into health and wellness [or prevention],” Quesada said adding that percentage of the A-B market spending more on car and real estate.

In Cebu for instance, an average of P373 billion annually is spent by the consumers to different categories including basic necessities such as food, housing, transport, communication, light and water.

Of the P373 billion consumer expenditure in Cebu, 40 percent of this is spent by the A-B market, those that are earning P250 thousand a year and above.

Surprisingly, the A-B markets, and the C-D and E are closely at the same level in terms of spending on personal care. This means, that even the cash-trapped consumers are still buying beauty and cosmetic products, Quesada said.

Apparel spending of average income earners is also at the same level with the A-B market. Monthly salary-dependent individual for instance, is still buying apparel products, during hard times, he said.

Generally, he said consumer spending in the Visayas is still in a dynamic mode, thus retail industry here still managed to post good sales figures.

Economist: Now is the best time to invest in real estate

Updated April 27, 2009 12:00 AM

CEBU, Philippines - While interest rates are currently on its lowest, consumers are advised to seriously consider investing on real estate or house and lot packages.

“Now, is the best time to build homes and take advantage of the low interest rates offered by banks and even Pag-Ibig,” said Cebuano economist Perry Fajardo.

He said the prices of homes and even other real estate properties are growing so fast, and Return-of-Investment (ROI) is assured.

Fajardo, who sits as the Dean for Economics Department of the University of San Carlos, said that prices of construction materials are now at its lowest, and while demand for construction works are not really that high nowadays, fees for construction workers and even the neighborhood “panday” is now very negotiable.

Significantly, he said banks are now extending their offering for real estate products, especially housing loans with very competitive interest rate packages, to cope with the tough competition in the banking industry.

Consumers are encouraged to take advantage of this favorable opportunity to invest on housing products, Fajardo said.

For monthly salary earners, it is the best time to utilize the Home Development Mutual Fund or Pag-ibig—housing loan, while everything is low.

“Those who do not have a lot—borrow a lot,” Fajardo said explaining that the market for real estate now is on the loose, while some or most consumers are tied with the impression on holding on to their money and investment plans-- until the economy recovers.

Fajardo said for the real estate opportunity--now is the best time to let go of their money. Aside from low interest rates, developers are also offering attractive packages for buyers to cope with the tough competition.

He emphasized that with the present volatile economic movement, real estate offers the most safe investment opportunity, as value is guaranteed to be increasing.

However, for faster ROI, Fajardo said “be sure to buy the right location” for real estate investments. Those lots acquired that is within the neighborhood of a developing area, growth of value appraisal is faster, than those located in the far-flung communities.

According to Fajardo, those who have money, and are capable of borrowing capital for real estate investment, and even to achieve the desire of owning a house—now is the best time to realize the plan.

In the next few years, when the economy settles and on its recovery tract assessment value for real estate products will multiply significantly, and those that are wise enough to invest in these lean times will reap the good returns of their investments.

Cebu, specifically is one of the fastest growing urban centers in the Philippines, investment for real estate is at its ripe time now, or else those that fails to act now, will have their regrets in the future.— Ehda M. Dagooc

Condotels Meet Investors' Business and Leisure Objectives

By Julie Bennett

Bob Waun is CEO of Vacation Finance, a mortgage brokerage and lending company in Birmingham, Mich. He owns two hotel rooms that pay him to stay away.

Until recently, Mr. Waun owned a traditional vacation home, a cottage in upper Michigan. But after a particularly bad winter -- he arrived during a snowstorm to find that the plow service hadn't cleared the driveway and that the pipes had burst -- he sold the cottage and bought two condo hotel units instead.

Now, Mr.Waun and his family vacation in resort hotels in Michigan and Florida, and earn money when the rooms they own are rented out to other guests. Mr. Waun, his wife Lynn and their nineyear- old daughter spent the Memorial Day weekend in their unit at the Inn at Bay Harbor in Petoskey, Mich., a 152-unit condotel managed by Marriott's Renaissance brand.

"As we were checking out, someone else was checking into our room and I made $60 that night," Mr.Waun says. "If Marriott rents out the unit during the Fourth of July holiday, I'll make enough money to take my family on a trip to Mexico."

Experiences like Mr.Waun's are driving the market for condotels -- condominiums you buy that can be rented out as hotel space. According to Smith Travel Research in Hendersonville, Tenn., almost 10% of all hotel rooms under construction in the U.S. are condotel units and there are plans for 232 condotel projects with 98,237 rooms that could be built within the next decade.

Condotels are also being developed in Europe, South Africa, the Middle East and the Caribbean. Joel Greene, president of the Condo Hotel Center in Miami, a real estate brokerage firm that deals mostly in pre-construction units, lists 115 projects on his Web site, including five in Dubai.

A financing solution

Guy Maisnik, an attorney with the Global Hospitality Group of Jeffer, Mangels, Butler & Marmaro LLP in Los Angeles, says his firm has handled 65 condo hotel projects and "almost all the new projects we see have a condo hotel component. This is a concept that definitely has legs."

Condotels started in Europe and first appeared in south Florida in the 1980s, but did not become popular until the travel slump after 9/11 made it difficult for hotel developers to obtain conventional financing for new projects. They turned to the condotel concept, pre-selling rooms to individual investors, to raise equity.

In theory, the condotel meets two objectives -- that of the developer to get a project built and that of the buyer who, like Mr. Waun, wants a hasslefree place to vacation and the chance to make a little money on the side. Baby boomers are becoming active vacation homebuyers, says Mr. Maisnik.

"If you buy a condo in Aspen," he says, "you're not likely to use it more than 30 days a year. If you want to rent it out, you'll have to hire a management company and take your chances. The attraction of a condotel is that you can own a unit in a hotel with a well-known name, like Trump or Mandarin Oriental, enjoy first-class amenities and standards of maintenance, then let the hotel company arrange all rentals for a 30% to 60% share of the revenues."

Added costs

Deciding whether a condotel meets your objectives is more complicated. Condotels are expensive, costing 10% to 40% more than traditional condominiums in most markets. Monthly maintenance costs, to pay your share of the hotel's upkeep, can run as high as $900 for your 600-square-foot unit. Special assessments (costs paid for one-time occurrences) are common -- Mr.Waun has just paid $250 to upgrade the linen on his Marriott unit's "heavenly bed" -- and you must pay to replace the furniture every five to seven years.

Buying that unit makes you an investor in the highly cyclical hotel industry. Tom Engel, president of the TR Engel Group, a lodging advisory and investment services business in Boston, says the $123-billion U.S. hotel industry is currently hot. "We have more heads than beds and the industry should remain healthy for 24 to 36 months because we don't have a lot of new projects coming into the market," Mr. Engel says.

Long term, if the economy softens again, or if all the proposed condotel projects actually open, that situation could change. "First and foremost," says Mr. Engel, "the project must work as a conventional hotel, with enough demand 365 days a year to justify its existence."

That means that some rooms must be available 365 days a year for transient guests, and not filled with their vacationing owners. If you want to put your unit into the rental program, most condotel developers, like Robert Falor, CEO of Falor Companies in Chicago, will limit the time you can use it yourself. Mr. Falor, who is converting a hotel on Wacker Drive in downtown Chicago into Solis Chicago, says the project's 454 owners, who will pay an average of $485,000 for their units, will be limited to 45 days of use if they want a share of rental revenue.

Developer Bayard Spector, president of Spector Real Estate Investments in Dania, Fla., says he bypasses such restrictions by building projects only in communities that limit condotel use in their zoning ordinances.

Mr. Spector is building 419 suites at the Atlantic Village Hotel and Marina at Dania Beach, Fla. Buyers who enter the rental program can stay in their suites for a maximum 90 days a year. His onebedroom suites, which sell for an average $500,000, include a feature not found in comparable projects -- a locked owner's closet for storing summer clothes and other belongings.

To buy that locked closet suite, or any condotel unit, you must get a mortgage and most traditional lenders shy away from the condo hotel marketplace. Chicago mortgage broker Oren Orkin of Perl Mortgage says the few lenders he works with require units to be at least 600 square feet in size (the average hotel room is 350 square feet) and to include a kitchen.

In his professional capacity, Mr. Waun says he's arranged a few hundred condotel mortgages, even for small units without kitchens, mostly with small private banks. "When you're condotel shopping, ask the salesperson which lenders have already written mortgages for the property," he says.

But don't ask how much money you'll make from the rental program. While the condotel you buy may generate some money, salespeople sell the units only as vacation homes. Developers are so skittish about discussing revenue -- thus invoking stringent regulations from the Securities and Exchange Commission -- that they've completely separated the sales and rental program functions.

Ray Velazquez, director of sales for St. George Residences & Condo Hotel, works from an office near the future luxury project's site, in Coral Gables, Fla. But he refers all rental program questions to the Fort Lauderdale office of Rich Richardson, owner relations manager for Hilton Hotels, which will manage the 200-unit property.

Mr. Richardson can give no specifics -- the project won't even open until summer 2008 -- and tells prospective buyers to check out the rate and occupancy levels of hotels in the area that are open now. Hilton, like all condotel operators, has devised a system so that all rooms in the rental program receive their fair share of paying customers. "Room allocation rotates like a carousel," Mr. Richardson says.

Mr.Waun says he purchased the least expensive condotel units available in his selected resorts, spending less than $200,000 for his Michigan unit and about $250,000 last November for a one-bedroom unit in the Mayfair Hotel & Spa in Coconut Grove, Fla. He says rental revenue from his Mayfair unit more than covered his mortgage payment and maintenance fees for December through March, but dropped off in April.

New 'Condotel' Concept May Ease Hotel Financing Crunch

By Lewis, Connie
Publication: San Diego Business Journal
Date: Monday, November 22 2004

Condotels, a trend that could make it easier to finance hotel construction and purchases and turn average individuals into hoteliers - or at least hotel room owners - appears to be making its way to San Diego.

It's nothing new, according to lodging industry analysts, who say they are common

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in Europe and Latin America and sprang up in Florida in the 1980s before the 1986 Tax Reform Act reduced the tax advantages on such investments.

But tax laws were loosened and the concept resurfaced and spread to New York City and Chicago following the tourism downturn that came in the wake of the Sept. 11, 2001, terrorist attacks. when lending for hotel projects all but dried up.

Lenders have begun to look more favorably at hotel projects within the past year or so. But they still want developers to come up with as much as 50 percent or the cost of traditional projects, analysts say.

So condotels are a way to fill the equity gap, since construction loans for condominiums involving a pool of buyers are typically a much higher portion of the project's value. Downtown's residential condo boom attests to that.

At least half a dozen developers apparently are looking for places to build condotels in San Diego, according to tourism industry insiders. But only one, Sandor Shapery, who owns the extended-stay, five-story Staybridge Suites in Downtown, says he will sell some units of a proposed 44-story adjacent addition to separate corporations or individuals.

Plans have not been finalized for the property on 11th Avenue near Balboa Park, and the cost of construction has not been estimated. Shapery, who developed the Wyndam San Diego at Emerald Plaza hotel, said the majority of the Staybridge addition's units will belong to the hotel.

He expects, however, that one-bedroom units with kitchens would be attractive to corporations for extended stays for their staffers. And he also thinks companies would welcome 'the opportunity to make revenue from the units in between time when they don't need them.

Another incentive to condotel ownership, Shapery said, is that beyond a revenue stream, individual owners can anticipate they'll appreciate in value.

A Hot Topic

Jim Butler, the chairman of the Global Hospitality Group of the Los Angeles-based law firm of Jeffer, Mangels, Butler & Marmaro, said condotels are in demand by "aging boomers as alternative investments."

"The stock market is perceived to not be as attractive as in 1999 or 2000," he said. "But a condotel is real estate. So you can live in it or visit it and there's great interest and great demand."

The topic is so hot that Butler said he began conducting regular seminars on it in March.

But condotels, which differ from timeshares in that they are individually owned real estate properties. are not a panacea to the volatile stock market, he said, explaining that securities laws could come into play if the sale involves rental pool agreements.

Condotel projects may be structured a variety of ways, but in the purest sense, all of the rooms are individually owned.

Using the example of the Silverado Resort

in Napa as a pure condotel, he said all of the hotel's rooms have individual owners and all "are in varying states of repair."

Other properties have a mix of "dedicated" rooms belonging to a hotel company and others that are owned by individuals. But usually the hotel company maintains ownership and control of common areas, such as restaurants and bars.

"So there can be mixed regimes, with operating the business and then a homeowners association and sometimes you have a lot of complex agreements that aren't worth the brain damage.

"I'm not against condo hotels. They serve a role and offer a distinct opportunity. But they're not for everybody. People need to understand how they work."

Costs, Locations Vary

From an investment standpoint, individual buyers need to study the market when they start to consider different hotel brands. A high-end establishment might work well in one area, while a lower-end one would work better in another, Butler said.

Building costs and selling prices vary depending on the size of the condotel units, where they're built and whether they are luxury, low-end, or something in between. But the cost to convert standard hotel rooms to condotels would be less than building new ones.

"This is a product that works in vacation or resort-type destinations and it's also proving to work in urban centers, and San Diego is the best of all of those," he added.

Bob Rauch, director of San Diego State University's Center for Hospitality and Tourism Research, said individual condotel investors also need to consider what they'll have to spend to upgrade their rooms or units as the hotel's brand demands.

But those expenses would probably be no greater than one might pay to freshen up a standard residential rental each time a new renter comes in, he said.