Top 10 Frequently Asked Questions About Condo Hotels

by : Joel Greene

Have you considered the purchase of a second home but hesitated because you didn't want the hassles of ownership or you couldn't justify the expense of a place you'll probably use just a few times a year?

Then consider a condo hotel. You might find that this new type of real estate is the ultimate, hassle-free vacation home.

1. Exactly what are condo hotels?

Condo hotels are typically high-rise, luxury properties in popular vacation destinations, such as near beaches, golf courses, casinos and theme parks. They are operated by prestigious hospitality companies like Hilton, Starwood, Trump International, Four Seasons, Hyatt, Ritz-Carlton and Sonesta.

While to guests they may look like a regular hotel, the suites are individually owned as condos. The owners can use them when they want and place them in the hotel's rental program when they're not there, sharing in the revenue their condo generates.

An on-site management company takes care of everything from renting out the unit to operating and maintaining the property. For that reason, condo hotels are often referred to as problem-free vacation homes.

2. What are the typical amenities found at condo hotels?

Of course, every condo hotel is different, but these properties usually offer the amenities and guest services you'd find at a hotel of four-star caliber or better.

These can include pools, spas, fitness facilities, business centers, restaurants, night clubs, retail stores, meeting facilities, concierge services, 24-hour security, room service, valet parking and daily housekeeping.

The individual condo hotel suites are usually slightly larger than your typical hotel room, professionally furnished, and have kitchens or small kitchenettes.

3. Where are condo hotels found?

The condo hotel concept started in Florida, but these days condo hotels are popping up all around the U.S. and the world. They are found in popular vacation destinations such as Miami Beach, Orlando, Las Vegas, Myrtle Beach and throughout the Caribbean.

Each location has something unique to offer. Decide what you love to do when on vacation, and find a condo hotel to fit your needs.

4. How does a condo hotel differ from a timeshare?

With a timeshare you are purchasing one or two weeks of usage of your vacation home per year, and it's usually the same weeks each year. That doesn't allow you a lot of flexibility with your vacation schedule, unless you participate in an exchange program.

A condo hotel unit provides you, the owner, deeded whole ownership. You can use your vacation home as often and whenever you want, (although some restrictions may apply if you choose to participate in the optional rental program).

5. What expenses should be expected when owning a condo hotel?

The individual condo hotel unit owner typically pays for real estate taxes, insurance, capital improvements and his or her debt service.

The on-site management company pays operating expenses such as housekeeping, front office, maintenance of common areas and amenities, marketing and guest services.

6. Who operates the rental program in a condo hotel?

The on-site management company runs the rental program. Their job is to promote the property and generate a steady flow of guests to rent the units.

One of the key benefits to purchasing a condo hotel unit in a major franchise like Hilton, Trump International, Hyatt or Starwood is that its name recognition and multi-million dollar, worldwide reservation system help to keep your room rented and generating revenue year-round.

7. How much revenue does a condo hotel unit generate?

This, of course, varies between properties. Some of the factors that affect revenue are the quality of the property, whether it has a brand name, its location, and even how often the unit is used by the owner as opposed to being placed in the rental program.

Buyers of condo hotel units are advised to be conservative in their expectations and look upon the revenue their unit generates as helping to offset their costs of ownership, as opposed to creating a positive cash flow.

Total revenue is split between the hotel management company and the individual unit owner, usually on a 50-50 basis after expenses, although these percentages can vary.

8. Do condo hotels appreciate like other types of real estate?

They certainly can, and many people feel this is the key selling point of condo hotels. They see condo hotels as investments which, like other types of real estate, can increase in value over time, especially if the property has a good location, is well-managed and offers a full array of amenities and services.

9. How much do condo hotels cost?

Condo hotel prices vary, depending on quality, brand, amenities and location. The range can be anywhere from $200,000 to over $1 million for prime properties.

The highest prices are commanded at upscale locations such as Miami Beach and Las Vegas. In places outside the U.S., like Dubai, Mexico and Panama, for example, quality condo hotel units can often be had for bargain prices because of the much cheaper land and construction costs abroad.

10. Is financing available for condo hotels?

Yes, many lenders now offer financing on condo hotel units. However, the rate is usually slightly higher for this type of residence, because lenders assume more risk on a second home than a primary residence.