Mr. Glincher

Hospitality Law

Condo Hotels Give Developers Access to Capital

By Andrew Glincher, Office Managing Partner, Nixon Peabody LLP

Once limited to resort properties, where unit owners valued the ability to have their own apartment, but were only going to use it a few times a year, these hybrids became popular because they generated immediate capital for the resort owner and gave the unit owner the possibility of some rental income to offset his ongoing costs.

Today, whether it's the Four Seasons in Boston or the Plaza in New York or countless others in urban markets around the United States, the condo hotel concept has definitely gained recognition as a way of raising equity and maximizing the value of a property. In fact, published reports estimate that there are currently more than 200 of these projects, including over 60,000 condo units, currently under development.

There are a number of market forces driving this trend. One important factor has been the continuing strong demand for housing in most parts of the country. In many cities, after the most desirable sites for new development were exhausted, former office and industrial buildings have been converted to housing and some are yielding extraordinary returns.

In the face of this demand, numerous new hotel properties have been and continue to include condos. And aging properties in need of renovations and upgrades have converted portions of their space into condos as a way of financing the cost of improvements and enabling their owners to recoup their investments more quickly.

Condos within hotels have proven extremely popular with buyers as well, holding their value relatively well in weak markets and selling at a premium during strong markets. One reason is the economics. If you buy an apartment in a traditional condominium, there may be restrictions on your ability to rent it out to short-term or transient tenants. If you live in another city, or travel for much of the year, you might have no choice but to let your apartment sit vacant while you're not there.

Within the hotel setting, that same apartment could be rented out by the hotel management - just as it rents its other hotel rooms - during times when the owner is not using it. The unit owner and hotel management share whatever rental income is generated according to a pre-determined formula. Clearly, that represents an economic value beyond most traditional condos.

Also, the trend over the years in higher end condos has been an ever increasing array of services and amenities. Hotels are known for services and amenities, ranging from housekeeping to valet service to room service to spas. What better environment could there be for someone who values those things to buy a home?

There is also the added value that a property's brand can offer. Being able to live at a Ritz Carlton or a Four Seasons or an Intercontinental connotes a level of luxury - and in fact delivers a level of luxury - that people around the world identify with and aspire to. That translates into premium prices.

Of course, the process is not always a simple, straightforward one. Great hotels become iconic symbols in their communities and when changes are planned, community residents sometimes object. This is particularly true with older, luxury hotels - often the ones that are most in need of infusions of capital and extensive renovations. Working with community and political leaders, as well as local preservationists, and giving them an understanding of your needs and your plans, can help generate support - or at least openness - to the type of changes the property requires.

Given the fact that the financing of hotels requires a larger percentage of equity than many other types of property, owners and developers need to avail themselves of tools that enable them to raise capital while retaining their overall vision. The condo hotel concept provides the flexibility necessary to have the best of all worlds.

Andrew Glincher specializes in the negotiation and resolution of business and real estate disputes. Mr. Glincher has represented developers and owners of retail centers, hotels, movie theatres, office and industrial buildings and parks, utilities, restaurants, subdivisions, apartment complexes, assisted living housing complexes, long-term care facilities and condominium projects. Mr. Glincher is admitted to practice in Massachusetts, the U.S. Court of Appeals, Third Circuit, the U.S. District Court, District of Massachusetts and the U.S. Tax Court. Mr. Glincher can be contacted at 617-345-1222 or aglincher@nixonpeabody.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:

JUNE: Sales & Marketing: Who Owns the Guest?

Wendy Stevens

From digital room keys to wireless internet, the hospitality industry continues to embrace new tools and technologies that promise to enrich the guest experience. Advances in technology also open up possibilities behind the scenes for hospitality sales and marketing professionals—online booking services, social media channels, and hotel review sites are reshaping the sales and marketing landscape in important ways. But are all of those changes necessarily a good thing? Are there limitations to the power of technology, and inherent trade-offs and compromises that need to be taken into account? READ MORE

Joe Currie

Being a business traveler is not about choosing between Tahiti and Maui for a dream vacation; it is about the luck of dodging an air delay and narrowly catching a few winks of sleep at a hotel before a morning meeting with a client. Business travelers do not have the luxury of choosing time or location, but they do have a choice when it comes to their hotel booking, and the entity that has the most influence over that choice in accommodation ultimately becomes the owner of it. READ MORE

Bill Linehan

Channel management is a practice that allows hotel companies to cast a wider net to capture more market share. How you manage various marketplaces defines your customer acquisition strategy. RLH Corporation recognizes cost of distribution differences between direct and third-party channels, and we always promote direct bookings. However, an important component of increasing direct channel traffic and conversion is to leverage OTA site traffic to promote brand awareness. RLH Corporation takes a contrarian approach to OTAs – a customer acquisition strategy where we fish where the fish are to capture, convert and retain ongoing relationships with consumers. READ MORE

Tara K. Gorman

When guests checks into a hotel, there are plenty to mechanisms to protect their physical “stuff”, but how can they be sure that their personal information is protected? This is the question hotel owners and operators are keenly focused on in the aftermath of cybersecurity breaches in the hospitality industry. Guest Data - an Asset or a Liability in the Age of Cybersecurity? will explore whether guest data is an asset or a liability by exploring the rules and regulations that govern privacy and security, steps that hotel operations can take to ensure that they are in compliance with privacy and security requirements for guest data, and privacy considerations. READ MORE

Coming Up In The July Online Hotel Business Review




{300x250.media}
Feature Focus
Hotel Spa: Measuring the Results
As the Hotel Spa and Wellness Movement continues to flourish, spa operations are seeking new and innovative ways to expand their menu of services to attract even more people to their facilities, and to and measure the results of spa treatments. Whether it’s spa, fitness, wellness meet guest expectations. Among new developments, there seems to be a growing emphasis on science to define or beauty services, guests are becoming increasingly careful about what they ingest, inhale or put on their skin, and they are requesting scientific data on the treatments they receive. They are open to exploring the benefits of alternative therapies – like brain fitness exercises, electro-magnetic treatments, and chromotherapy – but only if they have been validated scientifically. Similarly, some spas are integrating select medical services and procedures into their operations, continuing the convergence of hotel spas with the medical world. Parents are also increasingly concerned about the health and well-being of their children and are willing to devote time and money to overcome their poor diets, constant stress, and hours spent hunched over computer, tablet and smartphone screens. Parents are investing in wellness-centric family vacations; yoga and massage for kids; mindfulness and meditation classes; and healthy, locally sourced, organic food. For hotel spas, this trend represents a significant area for future growth. Other trends include the proliferation of Wellness Festivals which celebrate health and well-being, and position hotel spas front and center. The July issue of the Hotel Business Review will report on these trends and developments and examine how hotel spas are integrating them into their operations.