Condo hotels are typically large, high-rise properties operated by franchise names such as Four Seasons, Ritz-Carlton, Sonesta, Starwood, Hilton, Rosewood, Regent International Hotels, Trump, Clarion, Conrad Hotels, Ramada, Double Tree and Le Meridien.
Condo hotels have condos that are sold to individual investors who may use their unit as a vacation home when they choose. When they’re not using their unit, owners have the option of placing it into an organized rental program. Rental revenue, which is shared with the operator, helps offset the owner’s expenses.
The Marco Polo Beach Resort acts as a hotel operator, and a property manager for individual owners who opt into the hotel program. When purchasing a unit already under contract with the hotel, the new owner will be bound to honor the current agreement the previous owner had. Typically, contracts between an owner and the hotel are made for a period of one year. So if for example, a unit owner signed a contact on February 8th 2021, the expiration of that contract would be February 7th 2022.
As an owner of a unit in the hotel rental program, you will be allowed up to three (3) months of personal use. This time can be used by the owner, or family of the owner. Personal use time cannot be used for commercial purposes.
Revenue between the hotel operator and the individual owner is shared on a 50/50 basis. This means that any net proceeds from rental income is shared 50% with the owner, and 50% to the hotel. Rental income is calculated specifically to deduct any expenses that could include Ramada franchise fees, credit card fees, travel agent commissions.
In the following graphic, you will see a real world statement of revenue from a month where 19 days were rented:
As noted previously, the hotel rental program is a way to generate revenue to offset expenses. Revenue can change through different times of the year, such as high season and low season. High season in South Florida is typically between December and March. Low Season is typically between August and November. Summer months are generally busy, however rates are not as choice as would be winter months.
Units are placed in various categories by hotel management. First, by room view. There are city views with kitchenette, partial views, partial views with balconies, pool views with balcony, and direct ocean front with balcony. Each category will have a base rate. Rates change on a daily basis and will also fluctuate based on current events, competing hotels and seasonal demand.
Once a unit is placed in a specific category room type, it is then assigned a category based on a grading scale: P (Premium), A, B, C and D. Premium will be a unit that is categorically deemed "best" and C & D being the "less desirable". It is important to note that though a grade does not affect the actual nightly rate, the Premium units are rented with priority, and rent more often. The lower. performing units will always get rented last.
Owners have a vacation home in a prime location at their disposal.Owners who choose to place their condo hotel units in the property’s rental program receive revenue which helps to offset the expenses of ownership.
Most condo hotels have wonderful features and services that enhance their appeal to potential buyers as well as future renters. Typical amenities are swimming pools, beach, fitness centers, dining options, concierge, and more. Services could include valet, and housekeeping.
Condo hotels offer hassle-free vacation home ownership. The on-site management company takes care of all upkeep, maintenance and interaction with renters. Should repairs or maintenance expenses arise, the property owner is ultimately financially responsible.
Owners of condo hotel units have the right to resell their unit at any time. They keep any profits derived from appreciation. Thus condo hotels combine vacation home ownership with investment potential.
Short Term Renting By Owner
A benefit of condo hotel properties is the less restrictive renting abilities investors have as opposed to traditional condominiums. Usually, condo associations restrict owners from renting during their first year of ownership and set boundaries that allow the property to be rented for a minimum period of 6-12 months at a time.
At Aventura. Beach Club, owners may rent their property from day one of ownership. There is a minimum rental period of 10 days , with a maximum period of 6 months. If you purchase a property that is on the 25% permanent resident list, you may rent your property to a prospective tenant for a period of up to 12 months (10 day minimum).
The fees associated with any rental are as follows:
$250 registration fee (provides guests access to amenities such as wifi, pool, towels, chairs, umbrella, fitness center)
13% Resort Tax (Based on market value gross rent)
Usually, the fees stated above are charged to the guest renting the property. A registration form must be completed and submitted to the hotel operator along with the fees for rental approval at least 7 days prior to arrival.
Once registered, your guest will be allowed to obtain keys from the rental agent office as well as an ID that will grant your guest access to the property and amenities. The front desk will be available to provide keys if a guest checks in at an irregular hour. The hotel operator however will not be available for any services whatsoever to an owner who is not a part of the hotel program or their private guests.
If you rent your property on an online platform such as Airbnb or VRBO, these sites often collect 13% resort tax from the guests at time of booking. If this is the case, you would simply provide the hotel operator with a copy of proof of payment as it relates to the 13% tax.
Here is a graphic of a real world 21 day private rental:
In this example, the total revenue generated by the owner was $2,155.90. Out of this total, you would deduct as follows:
$250 registration fee
The net to owner would essentially be $1,310.90.
The key takeaway from this information is that though private rentals may be more profitable than profit sharing with the hotel program, it entails hands on property management which is a full time job and should not be taken lightly.
All unit owners who are going to be renting their property short term must have all proper licenses and permits from the city, county and state.
The information on this page is not guaranteed to be accurate nor should it be interpreted as legal or financial advice. All prospective owners should conduct their own due diligence and consult with an attorney or similar before making an investment.