CONDO HOTEL FAQs by zhangyun



Condo hotels are a fairly new concept. Here are the most often asked
questions and answers.

1. In a nutshell, describe the essence of the condo hotel concept.

Condo hotels are usually large, high-rise, luxury hotels operated by big names
including Four Seasons, Wyndham, Ritz-Carlton, Sonesta, Starwood, Wyndham, Hilton,
Trump, Rosewood, Regent International Hotels, Clarion, Conrad Hotels, Bulgari and Le

Condo hotels have condos that are sold to individual investors who may use their unit
as a vacation home whenever they like. When they're not using their unit, owners have
the option of placing it into an organized rental program. Rental revenue, which is
shared with the operator, helps defray the owner's expenses.

2. What are the benefits to the condo hotel buyer/owner?

Owners have a luxurious vacation home in a premier location at their disposal. Owners
who choose to place their condo hotel units in the property's rental program receive
revenue which helps defray the expenses of ownership.

Most condo hotels have wonderful features and services that enhance their appeal to
potential buyers as well as future renters. Typical amenities are spas, health and
fitness centers, fine dining, business centers and more. Services could include valet,
concierge and housekeeping.

Condo hotels offer hassle-free vacation home ownership. The on-site management
company takes care of all upkeep, maintenance and interaction with renters.

Owners of condo hotel units have the right to resell their unit at any time. They keep
any profits derived from appreciation. Thus condo hotels combine vacation home
ownership with investment potential.

3. What is the role of the condo hotel operator?

The operator of the rental program, in exchange for a share of the revenue, markets
the units as a hotel, takes reservations, operates the front desk, maintains the
property and provides the services hotel guests expect, such as housekeeping, food
and beverage, and concierge.

4. Describe the typical arrangement between the condo hotel buyer and the
hotel management company?

Some of the items spelled out in a typical owner agreement include:
      The amount of revenue the condo hotel owner will receive.

      The amount of revenue the hotel management company will receive.

      Typical deductions before each of the parties receives their share, including
       money for a furniture, fixture and equipment reserve.

      The financial responsibilities of the individual condo-hotel owner, which usually
       include the real estate taxes, insurance, capital improvements and debt service.

      The financial responsibilities of the condo hotel management company, which
       usually include operational expenses like housekeeping, maintenance, front
       office, administrative and marketing.
      A rental program agreement which outlines the number of days per year and
       notice requirements for owners regarding use of their condo hotel units.

5. Can condo hotel owners rent out their units themselves and keep most or
all of the revenue?

In most condo hotel properties they can, but doing so defeats one of the prime
benefits of condo hotels which is hassle-free ownership. Most owners prefer to have
the onsite professional management company find and handle renters.

In addition, owners are likely to receive a higher level of rental income by participating
in the property's rental program which is administered by a recognized professional
operator that can capitalize on the hotel's national affiliation, its brand name, its
sophisticated reservation system and management expertise.

6. What are the keys to a successful condo hotel?

The essential ingredients to a successful condo hotel include a good location, an
attractive amenity package, a respected developer, a strong brand and good

7. Are developers willing to guarantee the rental of the condo-hotel units
when not used by the owners?

No, they are not. Developers are aware that potential security law issues can arise out
of the sale of condo hotel units. In order to avoid coming under the scrutiny of any
federal or state securities agencies, developers refrain from setting rental revenue
expectations for prospective buyers. Instead, the developer's emphasis in the condo
hotel's marketing materials and sales presentations is always on the real estate itself.

Generally, it is best to consider a condo hotel unit purchase to be similar to the
purchase of a second home or vacation home. Choose a desirable building in a good
location, and there is likely to be appreciation of the investment over the years. As
icing on the cake, owners who choose to participate in the rental program can receive
income from its rental to help defray ownership costs.
8. Where are most condo hotels located?

Condo hotels are typically found in highly desirable areas, often near the ocean, theme
parks, golf courses, or in major cities. Miami and Miami Beach were the first areas to
get large-scale condo hotels, and for a few years had the most condo hotel inventory
in the nation.

Now that most of those original condo hotels are sold out and raw land is virtually
nonexistent, the trend has moved north to places like Fort Lauderdale, Orlando,
Daytona, Destin and Tampa.

Outside of Florida, the area with the most condo hotels is Las Vegas, particularly on or
near the Las Vegas Strip. Also popular are condo hotels in thriving cities like Chicago,
New York and Toronto. Outside the U.S., condo hotels can be found in the Caribbean
including resorts in the Bahamas, Turks and Caicos islands and Jamaica. The condo
hotel concept has also become popular in Mexico and Costa Rica. In the Middle East,
Dubai is the dominant force in the condo hotel market with many five-star resorts
under development.

9. Are all condo hotels newly built?

There is a mix of condo hotels that are newly built from the ground up and those that
were originally hotels and have been upgraded and converted into condo hotels.
Because land in prime locations is so limited and costly, it is possible that condo hotel
conversions will eventually outpace new construction condo hotels.

10. How much does a condo hotel unit cost?

That's a little like asking, "How much does a car cost?" The answer, of course, depends
on which car, or which condo hotel and which unit. Factors that can influence price are
the property's location, the quality of the amenities and the brand name. Individual
condo hotel units are priced based on their size, view, floor height, features and

Generally speaking, across the entire spectrum of condo hotels, prices can range from
$200,000 - $2,000,000.

11. Does it cost extra to purchase a condo hotel using a real estate broker?

No. The price is the same whether you use a realtor or go direct to the property. The
seller (developer) pays all realtor costs in the form of a commission. In those cases in
which no realtor is involved, the developer either keeps the additional revenue or pays
a percentage of it to the property's in-house sales staff.

12. Where are most condo hotel buyers from?
Buyers come from all over the U.S. and from outside the U.S. as well. Because of the
weak dollar combined with high property values overseas, many Europeans and Latin
Americans find U.S. property extremely appealing. They like the idea of owning a
hassle-free vacation home in a prime location in the U.S. that can generate revenue
when they're not using it and is likely to appreciate in value over time.

13. Is financing available for purchasing condo hotel units?

Financing for condo hotel units is not difficult to find. Most lenders now are familiar
with condo hotels and recognize them as viable real estate investments. Often the
condo hotel property itself or your real estate broker can recommend reputable

14. When is the best time to buy a condo hotel?

The best time to purchase a condo hotel unit is in the early stages of pre-construction.
That's when prices are at their lowest, and buyers have the best selection of available

Because of the high rate of demand, most condo hotels go through several substantial
price increases before selling out, and most do sell out long before construction is
complete. In some cases, condo hotels sell out before construction is even begun.

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