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Condo Hotels - Buying a Hotel Room
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Condo Hotels - Buying a Hotel RoomThink of condominium hotels as similar to serviced apartments - the entire enterprise is managed as a hotel operation under a single brand and most hotel guests will have no idea whether their room is owned by an individual or the hotel itself. Whole resorts are sometimes developed as a condominium hotel and owners have the choice of occupying their unit, or participating in a rental pool, sometimes with an adjoining high quality hotel. Growing consumer sophistication has led to a demand for more flexible accommodation options and the condo hotel fits those changing needs perfectly. Combine this with an increase in investment appetite in the hospitality sector and the result is that condominium hotels are attracting serious investor interest. Why invest in one?Condominium hotels are not just good for the investors. The hotel groups also benefit because bringing in individual investors provides the on-going investment to get on with a project. The project developer sells each of the bedroom units to individual investors who sign a lease or management contract which sets out the operating duties of the manager, details who’s responsible for all the outgoings, how the remuneration will work, how the profits will be distributed and how long the room owner can occupy the room.
If you want to invest you need to choose a project that will be successful and ensure your investment is sound. Some of the key points to check are:• The hotel must be, first and foremost, a cohesive and efficient hotel business, rather than a combination of individual ownerships.
• The public areas such as the front office, the hotel lobby, public toilets and restaurants need to be of the highest quality to maximise earnings and bring in guests.
• Make sure the daily management is by either a recognised hotel management company, or a well-known specialist operator.
• Check whether there is an option to let your room on a long-term lease contract to the hotel operator and receive a fixed rent.
• The system for payments needs to be transparent and fair. You may receive a percentage of rent paid from operator to owner, or alternatively, a management fee paid to the operator based on a proportion of revenues. The operator will usually retain all profit from food and beverage operations.Condominium hotels offer a good compromise of income security and further income potential and there are an increasing number of lenders willing to finance condominium hotel purchases.Schemes differ around the world but a taking a straightforward example, if revenue from a room is split 50-50 between owner and operator. The hotel received all other income from hotel guests, such as food and drink sales but pays the operational costs. On this basis, the owner generates a return on investment of per cent, whilst the operator is rewarded with a residual profit of some 10 per cent. The owner gets even better value if he chooses to use his right of occupation when his room would otherwise be vacant and this could be around 30 room nights per year, at a nominal cost. When the time comes to sell, the room is regarded as legal real estate and there may be favourable tax and pension plan treatment of the asset in France, Spain and the UK.It has to be acknowledged that Condo hotels are such a new concept that there’s only an emerging market for secondary hotel investments, although there are now encouraging results from the re-sale market for condominium hotel units.Choosing the right location and the right hotel operator should go some way to smoothing the path for new entrants, with the promise of annual returns and the expectation of equity appreciation being enough to fuel the new investor’s appetite for the sector.
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Source: www.vivaestates.com
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