By David deForrest General Manager
I am interested in a property described as a
"Condotel" or Condo-Hotel. Can you give me an idea how these are operated and
how they work as investments?
The following information is generic and may not be applicable to the
particular property you are interested in, as some of these matters are treated
differently in some projects. However, they are generally the norm for this sort
of property. Be sure you review the Declaration of Condominium and By-Laws for
the specific project you have in mind.
What is a condo-hotel? A condo-hotel offers the opportunity to own an
elegant and exquisitely furnished hotel room in some of the most desirable
locations in the world. Since this is a purchase, the buyer not only gets a deed
to a property, allowing the sale or transfer of the unit, but also tax and real
estate appreciation benefits. When using the unit, the owner has access to all
of the amenities of the hotel. When not in use, the unit can be a available to
rent through the hotel's rental program.
What are the major benefits to an owner of a condo-hotel unit? Most
important is hassle-free ownership. When the unit owner, his family or friends
want to use the unit, they call the hotel and schedule a visit. While at the
hotel, they enjoy all of the amenities and services of the hotel. When the unit
is not being used, it can be rented through the hotel's rental program, with no
worry about maintenance and upkeep.
Who manages the hotel and what are their responsibilities? The hotel is
managed by a brand-name hotel operator. This operator not only manages the
hotel's rental program, but also markets the units, takes reservations, operates
the front desk, maintains the property, and provides the services hotel guests
expect, such as housekeeping, food and beverage, and concierge.
What general amenities does the hotel-condo have? Hotel-condos are
designed as high-end resorts. Units owners will generally have access to valet,
concierge, spa treatments, room service, maid service and world class
What are the expenses of a condo-hotel? Aside from the real estate taxes,
insurance and a mortgage payment (if there is one), there is a monthly
assessment that covers maintenance of the unit and common areas, furniture
replacement, utilities and a reserve fund.
Can family members and friends use the owners unit? Yes, with the
permission of the owner.
Will a unit owner always be able to stay in their unit? Every attempt is
made to make sure the unit owner stays in his room, but in high peak periods or
on short notice the unit may be rented. If that is the case, the unit owner will
be accommodated in another unit at a discount and personal belongings will be
transferred to it.
Can a condo-hotel be financed? Yes it can. However, it may not be
possible to finance it at the same rate and terms available for conforming
Can a Condo-Hotel be purchased under a corporation? Yes it can.
When can owners use their units? Each property varies, but generally it
depends on the management agreement and location.
Is it mandatory for the unit owner to be in the hotels rental program?
Sometimes yes, sometimes no. You must review the Declaration of Condominium to
How is the hotel rental program managed? The rental program is managed
through a special reservation system that assigns "rotation points" to the units
as they are occupied. This ensures that the units with the least amount of
points are the next to be rented as long as they meet the guests' requirements.
How does an owner's stay in a personal guest room affect the rental program?
When the unit is being occupied by the owner, his friends or family, the
hotel's rental program does not assign any rotation points to it. Thus, you are
encouraged to use your unit since the system will make up for the vacancy of the
room upon your departure.
How is the revenue split between the unit owner and the hotel? Typically,
the revenue is split 50-50 between the owners and management after expenses.
How often does the unit owner get paid? A quarterly financial statement
detailing the unit's activity is issued, with accompanying payment, if due is
typical but again, it depends on the management agreement and regulations of the
Can the unit owner get out of the rental program? Most hotel operators
will let the unit owners leave the rental program with 60 day notice.
Does the owner receive a percentage of the revenues from the other facilities
of the hotel? If the unit owner decides to participate in the hotel's rental
program, he will receive a portion of the revenues from his unit. However, no
other revenue from any of the hotel's services (i.e. restaurants, spas, shops)
Are there additional expenses that the unit owner incurs while staying at the
hotel? The unit owner is responsible for any services used in the hotel such
as meals, spa treatments and housekeeping. However, in many cases, there are
special rates for all the services for owners.
Can unit owners furnish their own units? If the unit is placed in the
hotel rental program, the owner must comply with the hotel's furniture
selection. However, the owner is free to bring any personal items while their
staying in their unit, which are taken with them when they leave.
How much does the hotel furniture package costs? It varies by hotel, but
the initial costs are generally included in the initial purchase price.
Is the unit owner responsible for the furniture? Owners are responsible
for their units and contents. They are required to buy the hotel's furniture
replacement program, which enables a change of furniture every few years. If
furniture is damaged while a guest is in the owner's unit, the hotel will bill
the guest for the cost to replace the furniture.