In the best of all real estate times, a condo hotel might have made good sense. However, here we are in 2006, with a cooling market. One real estate advisor expressed some strong opinions recently about avoiding buying into a condo-hotels, especially in Florida. He points out that there are about 28,000 condo-hotels in Florida, with 32,000 condo-hotel rooms currently under development. The majority are in Miami, Fort Lauderdale, Boca Raton and Palm Beach. The main point is that the idea, while it might have been viable, turns into a losing proposition when the market is way over saturated. Owning a place in a condo-hotel and hoping to always cover costs via your rentals puts you directly into competition with proper hotels. And if there's a choice, and the price is equal, it's hard to imagine luring people away from the hotels.
Personally, I think that his point is well taken, and I'd go one step further. I'd opt for a simple condo ownership, where the price isn't over-inflated because of the 'hotel' attribution. Then you are in the apples to apples market, competing with other condos, and have far more chance of getting a reasonable way to own a second home, and make some rental money too.
Well, the experts don't always have their facts straight. The fact is that about 90% of the proposed condo hotels that are still in the proposed stage at this date (Nov. 2006) that have not been able to attract deposits for 50% of the units, most likely never will be built.
This is due to the market softening. The softer demand, the reduction in speculators, has meant that the conceptual projects have having difficulty attracting deposits from buyers.
That is a form of self-correction in the market which will increase the success of the remaining projects that are already under construction or that will be coming to market.
Do not write off condo hotels as a viable form of appreciable real estate investment. If you had to choice between a condo that sells for approximately the same price per sq. ft. as a condo hotel (and the fact is they are comparably priced in most cases), and you intend to use the condo as a second home for only a few weeks or months out of the year (which is true for most Florida condo owners), why wouldn't you take the condo that has a built in income stream over the condo that does not?
As to Florida, where would you buy instead? Hawaii where the prices are 5-10x higher? Or some podunk minor market where nobody goes for vacation anyway?
Florida has the strongest, most consistent demand for leisure and business travel. The whole world wants to vacation here. That is not going to change any time soon. Even when you factor in hurricanes, this is true. As to hurricanes, consider that most of the big storms do more damage in the northeast and cause more devastation and annoying conditions than they do by passing through Florida.
So, would you rather vacation in say, Pennsylvania, New York and New England and face flooding while vacationers in Florida are enjoying sun and fun or would you rather be in the sun yourself? It's worth thinking about!
Posted by: Outta Names | November 03, 2006 at 08:48 PM
Thanks for enlightening us. You make some excellent points. David
Posted by: David Hehman | November 06, 2006 at 11:03 AM
..If you had to choice between a condo that sells for approximately the same price per sq. ft. as a condo hotel (and the fact is they are comparably priced in most cases)
Posted by: Juno888 | June 27, 2007 at 12:13 AM
Yes David makes some great points there. For branded condo hotels like Trump and Ritz-Carlton the room rates and occupancies are high enough that you can get your HOAs almost paid for. As long as the market doesn't crash, when you go to resell, you can be in quite good shape.
Posted by: Condo Hotel Resales | March 07, 2008 at 08:59 PM
You have a point there. Thanks for enlightening us.
Deirdre G
Posted by: condo for sale Philippines | December 15, 2009 at 11:41 PM
I agree and you have a point there. Very interesting concept.
Paula M
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