It took PHG only 3 years to assemble one of the most diverse hotel portfolios in Central Florida.
The current boom of condo-hotel properties, is noticeable where hotels sell off their rooms individually to buyers.
More than 18 such projects are either open, under construction, or planned from Daytona Beach to St. Petersburg.
The concept has changed, luxury hotels with developers turning to the real estate market instead of banks to fund construction costs. By selling ownership of the rooms in advance, developers secure more than enough money to build the hotels without the risk of making loan payments in the rocky early years of a hotel's debut.
Analysts note that only a handful of condo-hotel properties have been open long enough to offer comparisons for potential buyers, and there's no consensus on whether the units make good investments. Tourism officials also worry that the move toward individual ownership of hotel rooms could leave too few beds for tourists, as well as put pressure on the number of hotel rooms available for large conventions. Such conventions typically need thousands of rooms reserved years in advance.
But nothing seems to be cooling developers' enthusiasm for condo-hotels and their quick access to cash.
Last week, the owner of the Sonesta Beach Resort on Key Biscayne announced it will raze the 294-room property to make way for a condo-hotel complex, and Ian Schrager's ultra-hip Shore Club has quietly begun compiling a waiting list for buying its 325 rooms. Fort Lauderdale's tourism boosters also are salivating over a wave of luxury hotels slated to open in that former low-budget paradise for spring breakers -- projects financed as condo-hotels.
RENTAL POOL
Developers dismiss critics' concerns about a potential shortage of hotel rooms, saying most owners turn their units back to the hotel's rental pool. And they note the condo-hotel model is creating rooms when most banks won't fund hotels.
"To the extent it puts more hotels into the inventory, it's a good thing," said William Talbert, president of the Greater Miami Convention & Visitors Bureau.
By passing on debt, property taxes and other costs to unit owners, condo-hotel developers open a property with an instant profit on the real estate.
"You don't have to wait five years to sell your project," said Francis Nardozza, chairman and chief executive of REH Capital Partners, a Fort Lauderdale investment firm. "Essentially, you're selling it on Day One."
In return, unit owners -- who can pay in the low $50,000 for small hotel rooms or more than $1 million for an oceanfront suite -- get free stays in upscale hotels, instead of the housecleaning and shopping that often comes with a vacation home.
And when the owner leaves, the unit is offered for rent on a daily basis without any hassles for the owner. Unlike time-share units, which generally plunge in value with age, condo-hotel rooms offers the prospect of appreciation, or at least recouping the original purchase price.
Unit owners split operation costs with the hotel in exchange for a share of the room's rental income, typically about 45 percent. But with many hotels losing money their first few years in an always competitive and seasonal market, condo-hotel units are unlikely to be cash cows, the experts said.
BUY IT, USE IT
Federal securities law bars developers from marketing condo-hotel units as investments, but there's little question investors are fueling many of the projects' pre-sales. "Ninety-five percent of the time [buyers are] really more interested in an investment than in a vacation home," said Joel Greene, president of the Condo Hotel Center brokerage in North Miami.
If that's the case, then that pool could dry up if the first generation of condo-hotel projects generate too little cash and too low resale prices. But vacationers scooping up the units would be another story.
Hotel markets in Latin America, Europe and Australia have been building condo-hotel projects since at least the 1980s, but the concept was mostly isolated to ski towns in the United States. Then the Mutiny opened, signaling the start of a trend that spread quickly through South Florida.
The last two years saw developers across the country tip-toe into the concept. The Trump International Hotel and Tower in Chicago -- where Bill Rancic went to work after The Apprentice -- is a condo-hotel property. Aventura-based Turnberry Associates launched the first Las Vegas condo-hotel last January, and other developers are following suit.
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