This phase of the market is especially conducive to the condo/hotel arrangement, particularly in South Florida as land becomes scarcer and it makes more financial sense to revamp an existing hotel property and convert it into a condo-hotel. While this is not a new idea, it has certainly becoming more ubiquitous, as there isn’t a high-end hotel under development that doesn’t have a condo component attached to it. It is the perfect adaptation for cool, independent boutique hotels striving to show their individual personality and a wonderful match for those discerning, lifestyle craving unit owners.
The condo-hotel transformation is very attractive to investors from all parts of the globe as properties become more and more expensive in their own hometowns. Buyers from the U.K., Dubai, Venezuela, and the like, are clamoring for purchasing opportunities and Miami, being a world class tropical setting, it is even more attractive. Purchasers love the ability of owning a second home with hotel amenities. Amenities that could range from room service, restaurant, concierge, housekeeping, spa, pool, and even retail shopping. The added incentive of investing and receiving income from rentals that could potentially offset their investment costs is very palatable to buyers. And this trend isn’t limited to Miami as there are projects the world over and increase daily in numbers as owners see the potential.
The differences between condo and hotel management are several, although at its core, there are many similarities. The management company hires the employees, the vendors, oversees the budget, the collection of maintenance fees, supervises all work performed on the property, much of what it does for an association. The owner of the unit pays the maintenance fees, traditional property taxes, and insurance for their unit. However, that’s where the similarities end. A condo-hotel requires a much higher level of expertise. Developers often forget the hotel portion as so many are used to building, selling and leaving and they are completely unfamiliar with the very real notion of hotel operations. That demands a great vision, a wonderful story that draws you in, and a very strong operational platform. Once the condo units are sold, if they aren’t full, a developer will have a building full of angry buyers. Among its many responsibilities, the hotel management company is also responsible for renting out the rooms, maintaining the rooms, and rotating the various reservations between the units. The hotel has to be very effective in its marketing so that guests will actually want to stay there. It has to be efficient, so it will be profitable. Budgetary concerns, be it the association’s budget, the shared use budget or the hotel costs budget, all become part of the management company’s central focus.
Condominium Hotel Documents that are drafted should be done so with the assistance of Legal counsel. The management company is best utilized to analyze the revenue splits that will best work for the hotel’s size and rate, not to mention the number of consecutive days that an owner can occupy the room will need to be established. Other items that can affect potential unit owners is the time required that the owner must notify management in advance of their desire to stay in their unit at a given time and there may even be black-out dates. Usually it is stated that there is no personalization of the units and they all come furnished in a standard, pre selected décor (the easier to rent out the room and fall into a specific room category).
For our clients, the developers or owners of the hotel, transforming it into a condo-hotel is a fantastic option as they are able to sell the units and use these pre-construction sale deposits and use the influx of cash to carry them over the pre-opening, meanwhile still maintaining a good portion of their own hotel units, as well as any restaurants, meeting rooms, spas, and common areas.
Considerations that would have to be looked into, your city’s zoning laws and any other pertinent laws relating to Condo-Hotels for your area. Zoning laws can affect a myriad of items such as requirements for hotel room size, whether or not a unit can have kitchen or laundry facilities, maximum length of stay for the owner, record-keeping requirement by the municipality/government, occupancy limitations, standardized room furnishings, qualification standards for the condo/hotel management firm, maximum/minimum unit size, hotel signage, whether or not an occupational license is required for each unit aside from the hotel as a whole, supervised 24 hour front desk (also responsible for key disbursement and mail delivery by attendant), one centralized room management system, collection of tourist tax, one master utility meter, use of hotel address prohibited for voter registration, homesteading or vehicle registration, parking requirements, restrictions on non-residential condominiums and possible government inspection of occupancy requirements.