  We adopt the beam splitter model for losses to analyse the performance of a
recent compact continuous-variable entanglement distillation protocol [Phys.
Rev. Lett. 108, 060502, (2012)] implemented using realistic quantum memories.
We show that the decoherence undergone by a two-mode squeezed state while
stored in a quantum memory can strongly modify the results of the preparatory
step of the protocol. We find that the well-known method for locally increasing
entanglement, phonon subtraction, may not result in entanglement gain when
losses are taken into account. Thus, we investigate the critical number $m_c$
of phonon subtraction attempts from the matter modes of the quantum memory. If
the initial state is not de-Gaussified within $m_c$ attempts, the protocol
should be restarted to obtain any entanglement increase. Moreover, the
condition $m_c>1$ implies an additional constraint on the subtraction beam
splitter interaction transmissivity, viz. it should be about 50% for a wide
range of protocol parameters. Additionally, we consider the average
entanglement rate, which takes into account both the unavoidable probabilistic
nature of the protocol and its possible failure as a result of a large number
of unsuccessful subtraction attempts. We find that a higher value of the
average entanglement can be achieved by increasing the subtraction beam
splitter interaction transmissivity. We conclude that the compact distillation
protocol with the practical constraints coming from realistic quantum memories
allows a feasible experimental realization within existing technologies.
