The Condo Hotel - Just another fancy term for timeshare?
Absolutely not. Timeshares and "Fractionals" are completely different from condo hotels or "condotels" as they are sometimes called. So forget everything you know about time-share and get ready to learn about Florida Condo hotels, the City Beautiful's most exciting new condo concept.
Condo Hotel History
The condo hotel concept was actually born right here in Florida. A few years back in a suburb of Miami called Coconut Grove, the owner of an apartment building converted its units into hotel rooms, added some basic hotel services, offered to share the income and then sold these new "condo hotel" rooms individually. It didn't take long for existing hotels on South Beach to realize the potential of attracting new financial investors. This model enabled them to upgrade their properties and increase revenue by raising room rates. The concept proved to be successful for all involved and was taken to the next level when developers started to build new hotels for the specific purpose of encouraging condo hotel ownership.
In a traditional hotel, rooms are mainly built to maximize space and profit. That's why the classic 350 square foot rectangle room with the square block bathroom is found all over the world. The condo hotel concept forced developers to look beyond this model, and the latest Florida condo hotels have spacious floor plans and look like regular condo suites. Many contain full sized kitchens and other amenities not usually found in hotels. Some are extraordinary lavish.
The Condo Hotel Business Model
When considering an Florida Condo Hotel, understand that this is not just another real estate deal. Apart from the bricks and mortar, you're also buying into the Hospitality Industry. The decision which condo hotel is right for you should not therefore rely purely on how much you happen to like to rooms - or even whether or not the building is the place you would like to spend your own vacation. You should to do your homework on all aspects of condo hotel investment including who will be the managing hotel, average projected room rates, marketing methods to attract visitors, location of your unit within the hotel, and of course, how the profits will be divided between the investor and the management company.
Most managing companies operate on a simple profit split. A room gets rented and the revenue is then split 50/50 - or often 60/40. The owner will usually pay a pre-set monthly charge (similar to a condominium association charge), but is also responsible for taxes and insurance. Some operating companies have additional charges. Make sure you check the contract to see exactly what you'll be responsible for.
Some condo hotels will not take a direct cut and let the owner keep 100% of the room revenue. Instead, the owner gets a variety of charges for each night the room is rented. These can be based on room size, or set in advanced for all units. With all these
different ways of operating it can be a daunting task to figure out which condo hotel is worth investing in. It's worth finding a real estate agent who's specializes in condos and / or condo hotels. At Condo Metropolis, one of our agents is a former hotel manager, another is a former sales rep for a large Florida condo hotel developer.
As with most investments, you should be realistic with your expectations. These operations do not generally produce cash flow. Bear in mind also that Florida condo hotels are a fairly new concept (although they have already succeeded in other markets such as Las Vegas or Miami). In a town built on tourism and the second largest convention business in the country, there's every reason to believe that condo hotels will eventually thrive in Florida.
Good-bye Expedia! I now have my own room to stay in...
Well yes and no. Wanting a permanent place to vacation may not the best reason to buy into an Florida condo hotel. Of course, you have the right to stay in your own hotel suite, but in order to keep the operation of the entire hotel running smoothly, some condo hotels require significant notice for your arrival. Some even charge an operational fee for staying in your own room. And when you stay there you're going to be losing valuable revenue. It is not unheard of for condo hotel owners to book a room for themselves in another hotel, rather than disrupt the revenue stream at their own condo hotel.
Florida Condo Hotels: Worth Your Dollar?
As with any other real estate investment, choosing to by an Florida condo hotel is a personal real estate choice. It may be a fairly new concept, but being on board early sometimes means greater investment success. Many investors love the fact that they have more than a dormant piece of property. And of course there's no need to worry about break-ins, rent collection, repair, evictions - and lazy management companies.
Florida condo hotels. Quite possibly the best speculative bang for your buck. Ask Condo Metropolis to help you discover which condo hotels are thriving - and which to avoid...