A condo hotel, also known as a hotel-condo or a Condotel, is a building used as both a condominium

Condominium

A condominium, or condo, is the form of housing tenure and other real property where a specified part of a piece of real estate is individually owned while use of and access to common facilities in the piece such as hallways, heating system, elevators, exterior areas is executed under legal rights...

 and a hotel

Hotel

A hotel is an establishment that provides paid lodging on a short-term basis. The provision of basic accommodation, in times past, consisting only of a room with a bed, a cupboard, a small table and a washstand has largely been replaced by rooms with modern facilities, including en-suite bathrooms...

.

Condo hotels are typically high-rise buildings developed and operated as luxury hotels, usually in major cities and resorts. These hotels have condominium units which allow someone to own a full-service vacation home. When they are not using this home, they can leverage the marketing and management done by the hotel chain to rent and manage the condo unit as it would any other hotel room.

Legal conflicts

The U.S. Government is very strict about the type of advertising that can be done vis-a-vis condo hotel projects. Some condo projects have advertised themselves as real estate investments, but since the value of these condos as a real estate investment is not entirely clear the U.S. Government currently disallows use of this reference when advertising condo hotels.

Condo hotels have been criticized in California

California

California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

 for allowing developers to skirt laws designed to protect public access to beach

Beach

A beach is a geological landform along the shoreline of an ocean, sea, lake or river. It usually consists of loose particles which are often composed of rock, such as sand, gravel, shingle, pebbles or cobblestones...

es. Because such a facility has hotel rooms, it can be classified as a public accommodation, even though the majority of the units are privately held, and the facility does little to accommodate the public.

Location

While not intended as a complete list, the most popular locations in the U.S. for condo hotels include: Aspen

Aspen

Populus section Populus, of the Populus genus, includes the aspen trees and the white poplar Populus alba. The five typical aspens are all native to cold regions with cool summers, in the north of the Northern Hemisphere, extending south at high altitudes in the mountains. The White Poplar, by...

, Chicago

Chicago

Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...

, Miami, Fort Lauderdale, the Las Vegas metropolitan area

Las Vegas metropolitan area

The Las Vegas Valley is the heart of the Las Vegas-Paradise, NV MSA also known as the Las Vegas–Paradise–Henderson MSA which includes all of Clark County, Nevada, and is a metropolitan area in the southern part of the U.S. state of Nevada. The Valley is defined by the Las Vegas Valley landform, a ...

, New York City

New York City

New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...

, Myrtle Beach, South Carolina

Myrtle Beach, South Carolina

Myrtle Beach is a coastal city on the east coast of the United States in Horry County, South Carolina. It is situated on the center of a large and continuous stretch of beach known as the Grand Strand in northeastern South Carolina. It is considered to be a major tourist destination in the...

, and
Orlando, Florida

Orlando, Florida

Orlando is a city in the central region of the U.S. state of Florida. It is the county seat of Orange County, and the center of the Greater Orlando metropolitan area. According to the 2010 US Census, the city had a population of 238,300, making Orlando the 79th largest city in the United States...

. Condo hotels are also found at ski resorts and international destinations, such as Jaco, Costa Rica

Jaco, Costa Rica

Jacó is a coastal city, in the county of Garabito in Costa Rica's Puntarenas province. Located in the Central Pacific Region, on the pacific coast of Costa Rica. Jacó is approximately one hour by car from San José and Costa Rica's primary International Airport . Manuel Antonio National Park is...

. Investors spent an estimated $250 million on condo hotels in 2006, with much of that spending concentrated on resort areas.

Costs

Note that analyzing the economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 of a condo hotel unit is extremely difficult because of the challenge of getting accurate information about the potential income stream. Developers uniformly do not provide important data or estimates for room rates or occupancy levels for fear of coming under U.S. Securities and Exchange Commission (SEC) regulations on investments, as opposed to real estate

Real estate

In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...

 regulations.

Financial considerations

The primary factors that contribute to the financial outcome in ownership are rental revenue, appreciation or depreciation, lending and tax deductions.

Rental revenue is shared with the management company, and owners typically pay no upfront fees for management, which includes the marketing and reservation of the units. Typical monthly fees for units in the rental pool include FF&E (Furniture, Fixtures and Equipment) reserve and resort fee(s). Although the revenue splits between owner and management company do vary from project to project, most hover around 50 percent. Most condo hotels, and especially branded hotels like Westin or Ritz-Carlton

Ritz-Carlton

The Ritz-Carlton is a brand of luxury hotels and resorts with 75 properties located in major cities and resorts in 24 countries worldwide...

, are strategically located in resort economies or popular urban destinations, which allow for high nightly rates and consistent year-round occupancy. Rental income from hotel guests is at the mercy of travel patterns and may decline.

Many condo hotels, especially the branded condo hotels, have seen double-digit growth, and have out-performed traditional condos or single family homes in the same resort market. Condo hotels units are fee simple deeded real estate, and can be bought and sold like other forms of real estate. Because of the lack of resale data available for many of the emerging markets where pre-construction condo hotels can be found, experts heed caution when considering a condo hotel purchase for investment purposes alone. Just like traditional real estate, appreciation is never guaranteed. This very scenario most recently occurred in Las Vegas. Several of the more notable condo hotels have sold for less in the resale market than during pre-construction.

Financing is generally costlier than for a primary residence. Mortgage rates may be a full point higher, and in the past this was especially true because financial institutions were unfamiliar with the condo hotel concept. Pre-construction purchases require a significant down payment, and buyers will not see financial return or be able to use their unit until the hotel is completed and ready for operation. Furthermore owners may have to purchase extra insurance to protect against liability claims and some types of damage or loss.

Additional tax benefits may be obtained through condo hotel ownership. If the condo hotel is used for non-primary residence or residential rental, owners may be able to accelerate the depreciation on their condo hotel unit from 39 years, down to 27.5, 15, 7, and even 5 years. Condo hotel tax laws determine this, and affect individuals on a case-by-case basis, as each potential buyer’s tax situation is different.

Homeowner's association fees and services

As with most condominiums, owners of condo-hotel units are required to pay homeowner's association fees, commonly referred to as HOAs. The fee and services can vary a great deal. Factors causing a fluctuation are the hotel’s star rating and operation level, and its physical location. A property located on the ocean, for example, can experience coastal weather regular basis, which in turn can increase the need for more regular maintenance to the exterior of the building. Along those same lines, a property located in a ski resort must weather powerful winter storms and must also deal with snow removal services.

Exceptions aside, many of the fees and services found in HOAs are fixed and fluctuate very little from project to project. Services such as these usually include general unit utilities, common area utilities, individual room and building reserves, grounds maintenance, exercise area use fees, security

Security

Security is the degree of protection against danger, damage, loss, and crime. Security as a form of protection are structures and processes that provide or improve security as a condition. The Institute for Security and Open Methodologies in the OSSTMM 3 defines security as "a form of protection...

, pest control

Pest control

Pest control refers to the regulation or management of a species defined as a pest, usually because it is perceived to be detrimental to a person's health, the ecology or the economy.-History:...

, mechanical repair costs, safety alarm systems, parking area maintenance, pool

Swimming pool

A swimming pool, swimming bath, wading pool, or simply a pool, is a container filled with water intended for swimming or water-based recreation. There are many standard sizes; the largest is the Olympic-size swimming pool...

 area maintenance, and owner management and administrative services. Items related to hotel guest impact are generally not included in the HOA fees, these would include housekeeping

Housekeeping

Housekeeping is the act of cleaning the rooms and furnishings of a home. It is one of the many chores included in the term housework. Housecleaning includes activities such as disposing of rubbish, cleaning dirty surfaces, dusting and vacuuming. It may also involve some outdoor chores, such as...

, and costs related to hotel staffing and operation.

External links

• Hospitality Net: Regulating Condo Hotels