Checking Into Condo-Hotels

With the amenities of a hotel and the assets of a home, condo-hotels are one of the fastest-growing real estate trends

by Maya Roney

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Once you've hit the big time, there are certain perks you become entitled to enjoy: first-class travel, better bottles of wine, a garage full of expensive cars, and a vacation home. But all too often this last luxury takes the shape of a seasonal ski lodge or beach house, usually a good distance from your primary residence.

Before too long, you realize that you are paying to keep up a place 12 months of the year when you spend a fraction of your time there. Do the math. You're a smart person. Does that make sense?

What if, instead, you had the opportunity to have a place of your own but one that would make you money when you aren't using it? Better yet, what if, when you were in residence, you not only enjoyed all the comforts of home but all the comforts of a hotel as well?

If that sounds good to you, you may want to consider buying a property in a condo-hotel. A relatively new concept, condo-hotels, as the term implies, allow buyers to own an apartment unit in a hotel.

As with any condo, buyers share costs for the upkeep of common areas but maintain ownership of their own unit—but with the added advantage of being able to get a maid to change the sheets or room service to send up a trolley full of sandwiches day or night.

Today, across North America there are roughly 350 condo-hotels in existence or in development, according to the National Association of Condo Hotel Owners (NACHO). New project openings for condo-hotels are set to accelerate over the next year, with 27 opening in the second half of 2006, 37 scheduled for 2007, and 39 slated to open in 2008, according to Lodging Econometrics, a Portsmouth (N.H.) hotel industry research firm. In total, 103 projects with a planned 23,143 condo-hotel units are in the pipeline.

Boomer Boom

As with much of the real estate market, the condo-hotel segment has become overheated. Lodging Econometrics expects rising construction costs, an impending economic slowdown, and overheated development to lead to some project cancellations. Others are placing their bets on the 75 million baby boomers-turned-empty nesters who are hitting their financial peaks and looking to retire and downsize.

"As the early 1970s consumer was to the condominium, the baby boomer will be to the condo-hotel," says NACHO President and Chief Executive Officer Dante Alexander. "A couple of years from now, we are going to wish we had built more."

If you buy a piece of your favorite vacation accommodation, you can expect to receive all the services and amenities offered by the hotel during your stay. These may include concierge service, valet parking, room service, housekeeping, access to a spa and fitness center, and fine dining. Hotel management will also maintain the property.

When you are not using your unit, you have the option of placing it in a rental program that allows hotel management to book your condo as if it were a regular hotel room. Individual owners typically receive 35% to 50% of the rental income, which offsets property taxes, homeowners association fees, mortgage debt, and insurance. It's a good deal for the developers because they can offset much of the cost of development to the condo owners.

With Ownership, Some Restrictions

But there are some catches. For one, even though you may "own" the property, your contract may not allow you to occupy it as often as you like or even when you like. In many cases, you may have to give the hotel as much as 60 days' notice to reserve your room, and you may have as little as 30 days allotted to you per year to use it. (Hotel residences, like those being offered by the Plaza Hotel in New York, allow owners to use their unit 365 days a year.)

For many buyers, this isn't a problem. Those interested in condo-hotels are usually looking for a second home, explains Joel Greene, a broker with Miami-based Condo Hotel Center, an Internet broker that sells condo-hotels in the preconstruction stage. "They are in a position to travel more than ever, and owning a second home ensures that they will do this and is even a status symbol to some, like owning a fancy car."