What are condo hotels and what advantages do they offer?

Condo hotels: an innovative combination of hotel services and residential spaces

Condo hotels, which represent a unique combination of hotel and residential services, are gaining increasing popularity in various countries around the world. In recent years, there has been active development of such establishments in Russia as well. There are many types of hotels that differ in terms of comfort level, range of services offered, and appeal to tourists.

There is an increase in the number of mixed placement formats, such as:

• hotels with casinos;
• aparthotels;
• in particular, condo hotels.

What is a condo hotel?

A condo hotel, also known as an apart-hotel, is a unique form of accommodation that combines the best features of both a hotel and a condominium. Typically, these complexes have a high status — they are 5-star hotels with a large number of rooms, which can reach up to 1500.

The infrastructure of such hotels usually includes:

• restaurants;
• bars;
• spa centers;
• pools;
• conference rooms.

Although the management of such hotels is carried out by professional management companies, they are owned not only by these companies but also by private investors. People looking to invest buy not shares in the company, but specific apartments or studios with kitchens, which they can use for their own living or rent out.

Management of condo hotels

The management of condo-hotels is carried out by experienced managers working under well-known brands such as Four Seasons, Pierre et Vacances, Hyatt, Hilton, or Le Méridien. The first condo-hotels contributed to the development of the hospitality industry in Miami as early as the mid-twentieth century.

This concept is most appealing for resort destinations that attract tourists during the summer and winter seasons, where there is a high demand for long-term rental housing. Additionally, condo hotels are often built in major metropolitan areas where business travelers come for work.

Geography and investments

These institutions successfully operate in countries such as:

• USA
• Canada;
• Mexico;
• Panama;
• Costa Rica;
• Bahamas;
• Jamaica;
• Middle Eastern countries.

Condo hotels are less common in Europe. Mainly, such properties are located in major cities, like London or Paris, as well as in popular resort areas, such as the French Riviera or the Spanish coast. The majority of investors interested in the profitability of condo hotels in Europe are businesspeople with experience in commercial real estate.

Management contracts

The interaction schemes between hotel operators and unit owners are outlined in the management contract. This document describes the rights and obligations of each party, as well as the procedure for distributing rental income. Typically, such contracts are signed for a term of five to twenty years with the possibility of extension.

Unit owners receive between 40% and 70% of the income, but they are required to pay property taxes and are also responsible for the insurance and ongoing maintenance of their apartments.

Introduction

Condo hotel owners face various expenses related to ensuring the security of the entire complex, which is a key aspect of their business model. Typically, the apartments in such hotels are sold with ready-made furniture, but owners need to update the interior every five years, which entails additional financial investments.

Profit of hotel operators

Hotel operators, in turn, can expect profits ranging from 30 to 60 percent, while also taking on the responsibility for safety, attracting new clients, and organizing the booking process. Additionally, they are involved in:

• food supply;
• management of all economic affairs;
• providing concierge and service staff services.

These companies not only manage residential properties but also oversee establishments such as restaurants, fitness centers, and nightclubs.

Management contracts

In addition to the main management contract, hotel operators enter into separate agreements with each apartment owner regarding the rental terms. Each sale transaction is processed individually for each residential unit, allowing for the consideration of the specific requirements and preferences of the owners.

Infrastructure and services

As for infrastructure, it is shaped by various factors:

• location;
• target audience;
• the level of the hotel establishment itself.

The service package may vary depending on the region. For example, in condo hotels located in ski resort areas, additional snow removal services are required, while in coastal resorts, constant monitoring of the buildings' technical condition is necessary due to weather conditions.

Taking customer preferences into account

Condo hotels must take into account the requests and preferences of their clients. If the hotel is located in a business center, it is preferable to have conference rooms and other facilities for organizing events. In resort areas, a variety of amenities are often offered, such as:

• spa salons;
• water parks;
• pools;
• nightclubs.

All these factors make such establishments particularly appealing to vacationers.

Apartment prices

The prices for apartments in condo hotels range from $200,000 to $2 million, and the cost depends on a variety of factors:

• locations of the hotel complex;
• number of floors;
• level of services provided;
• the reputation of the hotel owner.

In Asian countries, prices for key units in condo hotels remain relatively low, while in major European cities and the USA, rates are often significantly higher. For example, at the Trump Soho hotel in New York, you can purchase apartments starting from 38 square meters for no less than 1.2 million dollars.

Advantages of purchasing apartments in condo hotels

Many real estate buyers now prefer to purchase apartments in condo hotels rather than traditional apartments in residential buildings. This is especially relevant for those who do not plan to live in their property permanently, as these types of units are perfect for vacations or business trips.

One of the key reasons for choosing condo hotels is the lack of need to search for temporary housing, which significantly simplifies the process. Additionally, apartment owners can rent out their units during the times they are not in use, allowing them to earn extra income.

An important point is that the hotel management company takes on the entire process of finding tenants, significantly easing the task for the owners.

Investments in condo hotels

For individual investors, investing in condo hotels appears to be a reliable and less risky choice. These complexes attract buyers with a high level of service and quality of offered amenities. It often happens that all the apartments are sold out even before the construction is completed.

The hotel chain responsible for managing condo-hotels ensures compliance with all necessary construction standards and obtains all required documents from legal and financial authorities.

Advantages for construction companies

Construction companies also find many advantages in condo-hotel projects. Unlike traditional hotels, the return on investment timelines for condo-hotels are much shorter — only 1.5 to 2 years, while for regular hotels this period can stretch from three to seven years.

However, like in any business, the effectiveness of such projects depends on a variety of factors, such as:

• Location
• Tourist activity level
• Coordination of the management company

Tax benefits and opportunities for investors

In a number of countries, purchasing apartments in condo hotels is considered an investment in commercial real estate, which attracts the attention of investors. Owners of such properties can take advantage of tax benefits.

For example, in France, there is a reverse leasing mechanism that allows owners to reclaim VAT.19.6%When purchasing residential property, the VAT refund applies not only to the cost of the apartments themselves but also to expenses for furniture and parking.

Limitations and drawbacks

It is important to note that one of the advantages for investors is the possibility of obtaining a passport or residence permit. However, this type of real estate also has its drawbacks. Owners must consider the restrictions on the duration of stay in the condo.

The contract with the management company clearly specifies the number of days the apartment owner can stay at the hotel — often this period is limited.four weeks a year.

Conclusion

All of the above makes the purchase of apartments in condo hotels a very attractive option for both private investors and construction companies. This contributes to the active development of this sector in the real estate market. The new opportunities offered by condo hotels continue to attract the attention of a wide audience of investors, opening new horizons for income and comfort.

Conclusion

In conclusion, considering the concept of condo hotels, I realize how relevant this type of accommodation is in today's conditions, especially in the rapidly changing world of tourism. By combining the advantages of hotels and condominiums, condo hotels offer a unique opportunity for unit owners not only to use their properties themselves but also to generate rental income. This format is becoming increasingly popular both in Russia and abroad, creating new opportunities for investors.

With a developed infrastructure and a high level of service, condo hotels offer their residents all the amenities one would expect from a five-star hotel, while remaining more accessible to the target audience looking to enjoy a comfortable vacation or business trip. It is also worth noting that the interaction between management companies and unit owners is based on mutually beneficial terms, making this business attractive to many investors.

Advantages of condo hotels

• Unique formatcombining the advantages of hotels and condominiums.
• Developed infrastructure and a high level of service.
• The opportunity to earn income from rental.
• Adaptation to market needs and customer preferences.

Disadvantages of condo hotels

• Certain risks associated with investing.
• Difficulties in management.
• Possible changes in the real estate market.
• Fluctuations in tourist flow.

Despite all their advantages, condo hotels have their drawbacks that should not be overlooked. Investing in such properties comes with certain risks, and it is important for owners to carefully consider all aspects before making a purchasing decision.

Nevertheless, considering the current trends in the industry and the steady interest from tourists, condo hotels represent a promising opportunity for both businesspeople and ordinary citizens looking to improve their financial positions. I believe that this format will continue to evolve, adapting to market needs and changing customer preferences, and in the future, condo hotels will occupy a significant place in the tourism infrastructure of Russia and beyond.