Financial Schemes

Financial Schemes

HTT 230

If I were a developer of major hotel properties and was interested in a new project on the beach in Puerto Penasco, Mexico I would choose to use the mixed-use financial scheme. This area is known for tourists, season vacationers, and weekend trips. Mixed-use is the perfect financial scheme. A mixed-use development project would create large luxury hotels, residential condominiums, entertainment venues, health club facilities, and upscale retail space. Basically, when an individual or a various party amount want to get away, why not to a place that is an ideal vacation spot with all the necessary amenities such as food, lodging, and entertainment? The financial advantage that a mixed-use has is that the developer can sell to not only weekend customers but to a large pool of vendors, lenders, and investors as well. This will also allow a lower blended interest rate created by lower interest rates offered by lenders on the non-hotel components of the project. Another advantage is a higher internal rate of return driven by the lower cost of capital and premium pricing. A disadvantage of the Timeshare concept is units must be sold quickly which totals to half of the profits being spent on marketing. A disadvantage to Condominium hotels is that the developer receives profit up front but cannot make any future profits off of the units. The Mixed-use scheme presents the least amount of risk because every way you turn profit will be made, not much time and money has to be spent on advertising, and there isn’t much that is not offered. The most risk would be the Timeshare scheme just because so much effort and profits has to go into selling one week of property use to many people.