Condo hotels are hot properties these days, and according to new research by Lodging Econometrics, Portsmouth, N.H., the trend is not expected to cool.
The pipeline for condo hotels—which are properties where some or all of the units are owned by individuals rather than companies—is well stocked over the next few years with 29,042 units in 105 hotels either under construction or in the planning stages. About 75 percent of these units are new construction, with the remainder converted from existing guest rooms. Eighty-eight percent of the hotels are considered luxury or quality; 46 percent of them are in Florida.
To the consumer or meeting planner, this trend has little effect, explains Mark Eble, vice president, PKF Consulting, Indianapolis. “The consumer will never know the difference,” says Eble, as the hotel will still be run and managed like a hotel. The only difference is that the individual unit owners can use the rooms when they want, and the rest of the year the units will be rented out, with the individual getting a cut of the profits.
Developers like it because individual owners are less demanding than institutional owners in terms of the return they expect to generate. Whether or not it pays off for the individual investors remains to be seen, says Eble.
To date, the condo hotels on the market are generally high-end boutique properties that aren’t often used by groups for meetings. One example is the Mayfair Hotel and Spa in Miami. In Chicago, the Hyatt Regency Printer’s Row will be converted to a condo hotel. Donald Trump is also building one in the Windy City, the Trump International Hotel and Towers.
In 2008, the Grand Hyatt Las Vegas at the Cosmopolitan Resort and Casino will open. This condo hotel will feature significant meeting space. Two-thirds of the hotel’s 3,000 rooms will be owned by individual condo owners who will have the option to rent them to consumers when they are not using them. One-third of the rooms will be traditional hotel rooms, owned by the developer and managed by Hyatt. The property will feature 150,000 square feet of meeting space and a 70,000-square-foot casino.
The other trend in the industry is the conversion of hotel rooms into residential condominiums, occurring primarily in New York, San Francisco, and other cities where residential real estate is at a premium and in high demand. In New York, for example, The Plaza hotel is converting rooms to residential units. But, according to Eble, this trend toward residential condo conversions is not prevalent enough to have an impact on the group or meetings market.