Condo hotels are normally hospitality developments with units usually larger than your standard studio hotel room; they are more like an apartment, fully furnished and decorated. Most of them have all the amenities of a second home plus the benefits of a full service hotel.
The Property Manger of the rental program, in exchange for a share of the revenue, markets the units as a hotel, takes reservations, operates the front desk, staffs and maintains the entire property, and provides the services hotel guests expect, such as housekeeping, food and beverage, and concierge.
Condo hotel units are sold to individual investors who may use their unit when they want and place it into an organized rental program when they’re not in residence. A portion of the rent revenue the unit generates goes to the hotel operator, and the balance goes to the unit owner, helping to offset the costs of ownership.
Condo hotels are designed to be vacation/second homes that are typically used only a few weeks each year by their owners. When owners are not using their unit, they can place it into the hotel rental program and receive a percentage of the revenue the unit earns. The split after expenses is normally 50/50.
Most condo hotels have exceptional amenities, such as world-class spas, resort-style pools, state-of-the-art health and fitness centers, gourmet restaurants and fully equipped business centers. Every unit is maintained at the highest possible standards. Most condo hotels are built on prime, highly desirable locations, such as nearby theme parks like in Orlando or ocean front properties in Miami.
Unit owners are more likely to receive a higher level of rental income by being in a rental program with a recognized professional operator because the hotel’s national affiliation, sophisticated reservation system, brand recognition, and management expertise helps ensure higher occupancy rates and the ability to charge higher rental rates.
The Fine Print
Q. Who pays for maintaining and repairing the condo hotel?
The cost is divided up among the owners who must pay a monthly HOA fee. The fees typically cover common area maintenance, property insurance, utility expenses and reserves. The hotel management company pays for its costs of operation including marketing, reservation systems, salaries and other direct hotel expenses.
Q. Will developers guarantee occupancy rates and revenue to the individual owners?
A. No. The Developer cannot guarantee occupancy rates or forecast specific returns. It is important to choose a condo hotel with a well-known brand, good amenities and an appealing location to help ensure high occupancy rates. This also contributes to have competitive rates that will maintain favorable revenue.
Q. Why are condo hotels so appealing to International buyers?
A. For an absentee owner, condo hotels are very appealing. They get a first-class vacation property in a highly desirable location. When they are not using it, a professional hospitality company takes care of renting, managing and maintaining the entire property for them. They can enjoy home-like accommodations with all the services of a hotel and also generate rent revenue when they are not using it.
Q. How much does a condo hotel unit cost?
A. Prices vary. They range from $250,000 to over a million. Prices are based on location, the quality of the condo hotel and its amenities, brand recognition, the size of the unit you choose (studio, 1, 2, 3 or 4 bedrooms) and its location in the building in regards to a better view or proximity to amenities.
Q. What is the benefit of using a real estate broker to buy a condo hotel unit rather than going directly to the developer?
A. Brokers can provide objective information about all the different condo hotel properties available. Their only goal is to help you find the property that best meets your needs, regardless of the seller. The information you get from on-site sales people will of course be biased toward the property they represent. Using a real estate broker is like hiring a personal consultant to protect your best interests, without any additional cost.
Q. Are Condo-Hotels good investment opportunities?
A. In addition to first class amenities and services, having a professional management company taking care of the property offers a safer type of investment from the upkeep and re-sale standpoint. Condo hotels should not be viewed as revenue-generating investment, instead as vacation lifestyle for you and your family to enjoy.
As an investment, the focus should be more on the property’s potential for long-term appreciation and not on speculating on revenue generated by rent to do more than to offset ownership costs.