New Condo-Hotel Owners Association Created

I was reading an article about investing in condo hotels and how profitable/unprofitable it might be. Here are some excerpts from the article and information on the new National Condo-Hotel Assn, called NACHO...

Bankrate.com
Do condo-hotels make good investments?
Thursday May 11, 6:00 am ET
Marilyn Bowden

Hoteliers in resort locations are offering guests a stake in the business by selling individual units as condominiums. Not only is this an opportunity to own a second home in some of the country's favorite playgrounds, promoters say, but owners can look forward to some income when the property's management rents the room out to guests.

Realtor Christian Charre, a senior vice president with Jones Lang LaSalle, markets hotels throughout the Americas and the Caribbean. He says, "Having a professional company renting the room for you the rest of the time, when it would otherwise be empty, can offset some of the expense -- and you still own a piece of the beach."

It sounds like a pretty good deal, but the facts show condo-hotel consumers would be wise to check the closet for financial skeletons before signing on the dotted line. The hotel business can be notoriously unstable -- and if that room doesn't rent out, the buyer won't see any of the income from it.

(Webmaster's note: The majority of the preconstruction condos for sale in Myrtle Beach have on-site rental management...often from older local families that have run the hotels for years before the condo conversion. I think that investment condos in Florida and Las Vegas are dramatically different than the ones we have here....and a big majority of that difference is in price. You can only charge so much for a hotel room...condo or not. Myrtle Beach condos prices are still well under a million dollars for most condo resorts. The prime areas in Florida and Las Vegas are well over a million...)

Where you'll find them
"Condo-hotels are usually upscale, full-service developments in the strongest hotel markets -- either popular vacation destinations or large cities where suburbanites frequent hotels for business or leisure purposes," says Tim Ford, vice president of operations at Lodging Econometrics, one of very few companies tracking the trend.

Some 43 condo-hotel projects containing 7,715 guest rooms are scheduled to open this year in the U.S., Ford says. Another 33 projects totaling 8,271 rooms will open in 2007. Of these, 70 percent will be built new, while 30 percent represent conversions of existing hotels. Nearly half are in Florida. (See Florida Condos Here)

Jerrold Krystoff, principal and CEO of Hospitality Development Group, says InterContinental Resort & Residences will manage Villas at Palazzo del Lago, a condo-hotel his company plans to build near Disney World in Orlando.

"If you look at the new hotel projects coming online," Krystoff says, "most of them are condo. The lenders like it." (Mortgage Companies )

In fact, says Charre, the driving force behind the trend is the preference bankers show to hotel developers who come to them with preconstruction contracts in hand.

"A condo-hotel is a financing mechanism to shift the risk to individual owners," he says.

For the would-be purchaser, one of the most frustrating aspects might be that the developer of a condo-hotel is prohibited by securities law from revealing the kinds of information buyers would most like to know -- such as how many nights they can expect the room to be rented out, what the forecast is on rental rates, and how a property's performance compares with others in its geographic area.

That's a dilemma the newly minted National Association of Condo-hotel Owners, or NACHO, hopes to resolve. The organization serves both buyers and sellers.

"Condo-hotels are in fact the best secondary vacation-home purchase available today," says Dante Alexander, NACHO president and CEO, and a former executive with Starwood Hotels & Resorts.

To help buyers make informed decisions, NACHO plans to publish "categorical ratings that can only be viewed by members," he says. Criteria include:

Complex and unit maintenance.
Ability of the development team to complete the project.
Likely profitability of the hotel.
The hotel's long-term competitive sustainability.
Unit economics -- what a buyer can expect to pay in insurance, taxes, homeowner association fees and other costs.

NACHO'S website describes the organization's services as:
The National Association of Condo Hotel Owners provides buyers with unprecedented tools for making informed decisions in today's popular real estate segment, the Condo Hotel. Our proprietary Ratings System, our valuable Unit Economics Calculator, and our detailed, full disclosure Property Reports are just a few of the resources available to members that can make all the difference on your next transaction.