Just imagine: You'd have housekeepers, valet drivers, room service and more — all there to cater to your needs. If you lived in a hotel, chances are you'd also have a swimming pool, fitness center, restaurants and maybe even a spa right in your building. What a life!
Or, have you ever dreamed of getting some help with your bills? Just imagine: Every time you left your house for a night or more, someone else would stay there, clean up after themselves and then pay for the use of your property. You'd never have to do anything, you'd never know someone had been there, and you'd make some extra cash. What a deal!
Well, some developers and hotel companies are trying to make these dreams a reality for those looking to purchase real estate. The result is a new breed of property called a "condotel," a cross between a condo and a hotel. But how exactly do condotels work, and what benefits do they offer owners?
What are condotels?
First let us explain what condotels are. They can be timeshares. With many timeshares, buyers purchase the ability to stay at a resort for a certain amount of time at certain times of the year. Buyers are, in essence, paying for their vacation stays in advance. With a condotel property, buyers are actually purchasing a piece of real estate. Depending on the property, they might be buying a hotel room, or a studio-style room, or a three-bedroom condo or a "villa" — there are many different floor plans available and they go by a variety of names. (Villas and other free-standing residences are often called "fractionals," but to keep things simple, I'll use the term "condotel.") The bottom line is that condotel buyers own a real piece of property — one they can live in or rent out, as they please.
How did the condotel concept begin?
Building a residential condominium building or a new hotel is an expensive undertaking these days, especially in markets where land is at a premium. So developers thought, "How can we get someone to share the costs of this expensive project during the construction stage?" The answer, they realized, was to pre-sell the units as condominiums. Then, to sweeten the deal for investors, developers would bring in a property management company to run the building like a hotel, so that owners could rent out their units when they weren't using them and possibly receive some sort of return on their investment.
Perhaps not surprisingly, several big hotel names have gotten into the act. Brand loyalty has always been important in the hospitality industry, and the condotel trend gives savvy hoteliers the opportunity to turn loyal guests into loyal residents. Hotel brands like Starwood, Hilton, Marriott and Ritz-Carlton have all entered the condotel market. One hotel company with die-hard fans is Morgans Hotel Group. Marc Gordon, chief investment officer for Morgans, explains that his company entered the condotel market in part so that "guests will be able to own a piece of the Morgans Hotel Group lifestyle." Their Mondrian South Beach residence gives their hotel fans a chance to live in accommodations similar to the hotel rooms they love.
Residential ownership with a particular hotel group can confer privileges at other brand properties — a great arrangement for frequent travelers. For example, according to Gordon, Mondrian South Beach owners will be granted "VIP treatment at all Morgans Hotel Group hotels, restaurants and nightlife experiences worldwide." Even Canyon Ranch, known for its fabulous spas, now offers a chance to live the Canyon Ranch lifestyle in places like Miami and Chicago. So in many ways, the growth of the condotel market can be linked to the desire among some consumers to leave behind some of the burdens of homeownership and buy into a more service-centered way of life.
