Mike Paulin’s Wet Ride Home
His “condotel” company Aqua Resorts plunges into the Hawaii market
In 1997, Michael Paulin sold the resort management company he had founded a decade earlier to Sunterra Resorts for $6.5 million in stock. He bought a vineyard in Northern California for an active retirement with his nest egg. Then Sunterra declared bankruptcy on May 31, 2000, rendering Paulin's stock worthless. "I was very concerned about my future," recalls Paulin.
In November 2000, he founded Aqua Resorts, using $250,000 in leftover savings. He relocated to Hawaii in January 2001 to start a new resort management company with a twist. Rather than manage full-fledged resorts, Paulin wanted to manage condotels - a relatively new hybrid that mixes the attributes of hotels and condominiums.
Paulin called up Honolulu developer Peter Savio, who has a track record of hotel-to-condo conversions. They struck a deal. Savio would do the conversions and Aqua would provide management and advisory services to the new condo owners, including rental management of the units. Paulin also planned to kick in Aqua money for renovations required to upgrade units to resort standard and to help the properties set up amenities, such as maid and laundry service, that appeal to visitors. The condotel conversions would skip high-cost items, such as room service, a full front desk or restaurants.
Paulin says the strategy makes sense. Low-interest rates have stoked condominium purchases, and few resort condominiums are being built in Hawaii. Those two factors mean high demand for resort condominiums. Meanwhile, many hotel owners want to sell their Hawaii holdings. Finally, the number of repeat visitors seeking condotel accommodations continues to grow. According to the Hawaii Department of Business, Economic Development and Tourism, in 2001, repeat visitors comprised 61.1 percent of total visitors. In 2002, that tally increased to 62.3 percent. "Repeat visitors … want the freedom and flexibility of a condo over a hotel," says Paulin. Add to this the power of big Internet travel sites, such as Travelocity and Expedia, to help small condotel properties reach millions of potential customers, and Paulin figures Aqua is a smart bet.
So far, so good. In August 2001, Aqua Resorts' first property came online, the 167-room Aqua Marina Hotel on Ala Moana Boulevard. Later that year, Aqua took over management of the Bamboo Hotel, a boutique property in Waikiki in the midst of extensive renovations. According to Adele Preza, Aqua's vice president for marketing, occupancy at both properties shot from below 50 percent to more than 90 percent within a month.
"These properties had been operated by large chains and had no personal identity," explains Paulin. That may sound like marketing gobbledy-gook. But Aqua has been able to raise its room rates by 20 percent in each of the past two years and plans on raising them again in 2004. Paulin expects to post gross revenues of $4 million in 2003, with average daily room revenues running a respectable $70. He claims the company has already achieved profitability, no small feat in a depressed Oahu visitor market.
Preza and Paulin credit not only their marketing savvy, but also a motivated work force. "Every employee is a salesperson. If a call comes into the front desk at Bamboo, we give our front desk staff a commission for closing on that booking," says Preza. Hungry employees mean a leaner operation. Aqua runs with 40 employees today, down from 65 last year. Paulin says he has trained employees to perform multiple tasks, making front-desk people handy with paintbrushes and maintenance engineers able to switch on the sales charm and man phone lines.
To keep a finger on the pulse of operations, Paulin puts his own direct phone number on cards in all the rooms. He may have a lot more phone calls this winter. Aqua will take over the newly converted 166-room Kuhio Village Hotel in December 2003. Then, on Jan. 1, 2004, Aqua takes over management of the Aqua Coral Reef, a 246-unit building currently owned by Paulin cohort Andre Tatibouet that is scheduled for conversion this winter. Paulin envisions building his chain to 15 to 20 properties within the next five years, including properties on several Neighbor Islands. Says Paulin, "There's an awful lot of good hotel product out there."
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