Condo-hotel climate hot topic at timeshare conference
Nov 6, 2006By: Christine Blank
Hotel & Motel Management
ORLANDO—While developers are becoming more cautious, there still is a wide-open market for condo-hotels and fractional-ownership projects, according to a panel of developers and financial executives at the Vacation Ownership Investment Conference in October.
"What has been presented as a funeral for condo-hotels is anything but," said Scott Berman, a partner at PricewaterhouseCoopers. "However, there has been some angst over the business scheme in the last year and clearly, we are seeing a slowdown in what the pipeline may have looked like if we continued on the track we were on."
Instead, operators and developers are taking the opportunity to pull back and evaluate the market, and choose the best location and the best type of project, panelists said.
"The major brands have gone back to the boardroom, to make sure they understand the operator's point of view and what is expected of the operator in a condo-hotel environment," Berman said. "It is different when so many stakeholders are the unit holders."
Condo-hotel buyer profile
Developers also are being more selective about locations, because quality real-estate for condo-hotels and fractional-ownership projects are becoming harder to find. That is expected to lead to more vacation-ownership projects.
"A softer market opens the door for timeshare development," said David Callaghan, v.p., eastern region resort sales and service with Interval International in Miami. "Six months ago, people were looking at condo-hotels, now they're looking at vacation ownership."
Robert Phillips, senior v.p. of business development for The Ritz-Carlton Club, Orlando, agreed that developers are looking at condo-hotels more cautiously.
Changing Flags
"This has to make sense as a hotel," Phillips said. "You are going to need to appeal to the business and transient traveler and instead of one owner you have, in some cases, hundreds of owners."
At the same time, fractional-ownership projects have become a mainstream alternative to buying a second home and have quickly grown into a market worth more than $2 billion, Phillips said.
In addition, fractional-ownership projects are being built in more urban areas and would not be as favorable as vacation-ownership projects in locations such as Chicago and San Antonio.
"We are seeing a fractional that is more urban, more unique and high end," said Doug Kulig, president of OBM International. "These [buyers] tend to be more of the empty nester, more interested in shopping and the urban amenities."
Some of the new projects likely to be successful include those associated with major hotel brands, the panelists said.
"In the condo-hotel space, particularly with all the noise in the industry, its critical in most cases that brand sponsorship be assigned to condo-hotel," Berman said. "They bring some credibility that is desperately needed."
The future
"It is going to be better valuated, therefore we will see less angst going forward, assuming some of the projects in difficulty don't create hysteria," Berman said.
Over the next year, there will continue to be fallout from bad condo-hotel projects, he said.
However, something that fractional-ownership developers will have to watch for in the coming year is battles with local governments. Some governments concerned about transient residents taking away some of their bed tax are taking action to protect those tax streams.
To Learn More About Our Programs, Please Click Here to Contact Us
You must have javascript enabled.
