Prospective buyers signed contracts for all 248 condominium units in a converted Waikiki hotel during a nine-hour frenzy in early August. Condotels, which are hotel-condominium hybrids, are all the rage in some touristy U.S. markets. The sale of individual rooms in the converted hotel on the Hawaiian island of Oahu raised at least $28.8 million, according to local news accounts – far in excess of the $12.7 million that a California company paid for the hotel in 2001 before converting it into a condotel.
Condotels, also known as hotel-condominiums, feature privately owned condominium units for short-term rentals. Some condotels are converted hotels, others are part of a network of standard condominiums that are offered for short-term rentals, and some new condotels are high-rise condo developments built exclusively for short-term rentals.
The prices of condotel units can be lower than standard condominiums – the Waikiki project, for example, featured prices of $116,000 to $225,000 for the fee-simple units.
The Waikiki condotel project was the latest in a series of such projects by Aqua Hotels & Resorts in Hawaii. The resort management company, formed in 2001, now operates four condotels in Hawaii.
Nick Zelmer, a management trainee at Aqua Hotels & Resorts, said the company’s latest sale of condotel units drew Hawaiians, mainlanders and international buyers. Units in the latest project, the Palms at Waikiki, range from studio units to one-bedroom suites with full kitchens, Zelmer said. While private owners can take liberties with decorating the units, he said the company recommends that owners don’t add too many luxury items because of the high volume of guests in condotels. The Aqua Bamboo Hotel, one of the company’s condotels in Waikiki, reported an occupancy rate of 99.7 percent in July.
Owners of condotel units can arrange to stay in their units and they share in any profits if the rental income exceeds the cost of management and maintenance. Some condotel operators offer one-night rentals, while others require multi-night stays. The sale of condotel units is a source of revenue for real estate agents. Coldwell Banker Pacific Properties, for example, served as the exclusive real estate brokerage for the original sale of the Palms units.
The desert metropolis of Las Vegas, one of the hottest real estate markets and tourist destinations in the nation, will soon be a hub for condotels. Lauren Stark, a Realtor with the Dyson & Dyson brokerage in Las Vegas, said that the 45-story Krystle Sands Hotel Condominiums project will feature one-bedroom and two-bedroom condotel units, as well as penthouse suites. The units will be available for daily and weekly rental, Stark said.
“It is going to have a property manager and will be operated as a four-star hotel.” The condotel development will include a grocery store, retail center, rooftop restaurant, business center and spa on the site, she said. All units will come fully furnished and will have kitchens. Prices range around $500-$600 per square foot, she said, on up to $900 a square foot. Construction is expected to begin in six to eight weeks on the project, which is across the street from the “Circus Circus” casino and hotel in Las Vegas.
Not to be outdone, Donald Trump’s real estate development company has announced plans for a Las Vegas project, the 64-story “Trump International Las Vegas.” Preliminary plans for this project include condominium-hotel units. A Realty Executives of Nevada Web site reports that the planned project would cost $300 million. The hotel would be 645 feet tall, and is slated for 3.5 acres of vacant land across from the Fashion Show Mall, between Las Vegas Boulevard and Industrial Road. Plans call for a 1.6 million-square-foot tower and condominium-hotel units ranging from 636 square feet to 1,057 square feet. The building, as proposed, will reportedly be “clad in 24-carat-gold glass with sparkling white accents.”
Stark said that this project is “still very preliminary,” as the city has not yet approved the development plans.
Several condotel projects also are in the works on the other side of the country. Denise Assersohn, a real estate agent with Orlando Homes Worldwide Inc., said she has begun to specialize in condotel sales. The market “has been a little short on the number of resale houses, and prices have gone up so much on resales. Condos are looking like better deals for buyers,” she said, and there has been a particular surge in condotel projects.
Assersohn said that two major condotel projects are already under construction in the Orlando area. “We’ve got several developers that are putting them up,” she said. “It’s like a whole new wave of buildings that are coming up — it’s not something that we’ve typically seen in the past. (These projects) are all typically looking like a hotel resort, with all the features of a hotel.”
Some of the condotels are very near the convention center in the area, which can be key to good year-round occupancy numbers, she said.
Units can sell for as $135,000 to $400,000 or more, she said, and the square footage can range from 700 square feet to 2,000 square feet or more. “They’re all furnished and equipped,” she said, which makes it convenient for out-of-area owners, she said.
Frank Gay, Jr. of Condotels of the Magic World in Kissimmee, said his company has a supply of about 100 condominiums and 60 homes that are available for short-term rental. Gay said his company invests a lot of money in advertising to draw visitors to the company’s properties. “We keep our inventory as low as we possibly can because we feel like anytime we take on additional units we dilute the market in the off-season,” he said.
Gay’s son, Frank Gay III, owns a RE/MAX brokerage in the area, and Gay said he often refers condotel sellers and prospective buyers to his son’s brokerage. The term “condotel” has been around since the 1970s and has become a generic term, said Gay. Some consumers have the perception that all condotel units are small, converted hotel rooms, though Gay said that some of the condotel properties that his company manages are large condotel properties of up to 4,000 square feet.
Gay said that condotels can be comparable in price to hotel rooms, and can be a better value considering the square footage and amenities in some of the condotel units.
Short-term condo rentals “represent the future of the industry,” Gay said.
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