Condo Hotel Accounting

Section 1 – Introduction, Course Objectives

Section 2 – What is a Condo Hotel?

1. Description of a Condo Hotel.
2. Merging a condo complex with a standard hotel
3. Why build a condo hotel rather than a standard hotel?
   1. A Developer’s Perspective
   2. A Residential Unit Owner’s Perspective
   3. A Lender’s Perspective
4. Condo Hotels from the perspective of the SEC a. Real Estate or Investment Contract?
   1. SEC’s “No action, Interpretive and /or Exemptive Letter” to Intrawest
   2. Most Condo Hotels fall under this ruling

Section 3 – Understanding the Key Physical, Ownership and Management Components in a Condo Hotel.

1. Key Physical Components
   1. Commercial Units
   2. Common Areas
   3. Residential Units
2. Key Ownership Components
   1. Commercial Unit Ownership
   2. Common Area Ownership
   3. Residential Unit Ownership
3. Management Components
4. Introducing the Homeowner’s Association

Section 4 – Understanding the Condominium and Related Revenues and Expense to be borne by the Condominium Homeowner’s Association (HOA)

1. Condominium Documents or Condo Docs
2. HOA is separate company
   1. HOA – Separate company with separate books, records and admin
   2. “Stand Alone Condo Perspective”
3. Accounting for the HOA
4. Expense Differentiation between Condo and Standard Hotel 5. Quiz/Exercise

Section 5 – Overview of Accounting for the Individual Residential Unit Owner and Hotel Operator

1. Accounting involves producing financial statements for the HOA, Hotel Operator and each condo unit owner separately.
2. Introducing the “Property Management company” perspective
3. Splitting of Income and Expenses
4. The Rental Management Agreement
5. Contrasting Hotel Ownership between a Condo Hotel and a Standard Hotel

Section 6 – Overview of Hotel Operator Profit and Loss Statements in a Condo Hotel

1. The Statement of Income Page
   1. Economic risk
   2. Reporting Rental (Room) Revenue as “Other Operated Department”
2. Rooms Department
3. Food, Beverage, Golf, Spa and other Minor Operated Departments
4. Telephone and Rent and Other Departments
5. Undistributed Operating Expenses and Fixed Expenses
6. Quiz /Exercise

Section 7 – Accounting for Condo Rental Revenue

1. Pre-Split Deductions Introduction
   1. Examples of pre-split deductions
   2. Rental Management Agreement reference
2. Net Condo Rental Revenue
3. Calculation of NCRR Exercise/Quiz

Section 8 – Condominium Department Profit and Loss Accounting

1. Reported as Other Operated Department
2. Comparison of Condo Dept P&L to Standard hotel Rooms Dept. P&L
3. Accounting for pre-split deductions on the P&L
4. The flow of condo Rental Revenue through financial statements
   1. Gross Condo Rental Revenue and Market Source Segregation
   2. The flow of pre-split deductions and unit owner liability
      1. Flow of Credit card commission as a pre-split deduction
      2. Flow of Travel Agent commissions as a pre-split deduction
      3. Reservation Fees and Housekeeping Cleaning Charges
   3. Reservations and Housekeeping Departments
   4. Roll-up of separate Reservations and Housekeeping Departments into Condo Department
   5. Other Income as a Pre-split deduction
5. Quiz/Exercise

Section 9 – Two Methods to record the Condo Unit Owner portion of Net Condo Rental Revenue

1. Other Direct Expense Method
   1. Explanation and Illustration
   2. P&L Illustration
   3. Journal Entry Illustration
   4. Other Direct Method Example
   5. Exercises
2. Condo Rental Revenue Reversal Method
3. Quiz

Section 10 – Timing Methods for Recognizing Shared Expenses

1. Transactional Recognition Method
2. Recognition upon checkout
   1. Description
   2. Timing Issue
   3. Example
      1. Deferred Owner Income
3. Condo Hotels using the “Upon Checkout” Method combined with the “Condo Revenue Reversal” Approach
   1. Explained
   2. Example
4. Quiz

Section 11 – Miscellaneous Issues

1. How Linen is typically handled in condo hotels
2. How Housekeeping Work-Orders for special cleaning requests are handled
3. How to handle Small Appliance and House Ware Replacement in condo hotels
4. The importance of proper Condo Rental Rotation methods
5. Handling of No-Shows
6. Handling of Bad Debts
7. The right way to handle guest moves from one unit to another

Section 12 – The Property Operations and Maintenance Department and Energy Department in a Condo Hotel

1. Three Ownership groups define operation and expense for R & M
   1. HOA Expenses
   2. R&M within residential units
   3. R&M within commercial units
2.  Energy Dept and Expense segregation in Condo Hotel

Section 13 –Undistributed Departments and Rent, Tax & Insurance Dept.

1. S&M, A&G, RT & I Departments in a Condo Hotel
   1. S&M, A&G
   2. Rent, Tax, & Insurance
2. Quiz

Section 14 – Unit Owner Accounting

1. Introduction and Preview
   1. Sample Owners Statements Page 1
   2. Discussion points and highlights of Owner Statement Page 1 sample
   3. Owner Statement sample Page 2
   4. Discussion ……. Page 2
2. Owner Income
3. Directly charges expenses
4. Accounting for Net change in Owner liability accounts
5. Accounting for Unit owner directly charges expenses
6. Keeping it all in balance at the end of the period
7. Perfection is Expected Final Exam – 40 Questions

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