Posted on Sat, Aug. 19, 2006
By VINNEE TONG
The Associated Press
CHANGING SKYLINES
When urban dwellers think of condo-hotels, they usually imagine sky-high city apartments that come with daily maid service, mints on pillows and the option to order chilled champagne for delivery at any hour.
In New York perhaps, their fantasy would not be far from reality.
More often, though, condo-hotels are proliferating into midsize and smaller cities across the nation and, in some cases, transforming the places where they’re being built.
Condo-hotel projects can be found in different stages of development in cities such as Myrtle Beach; Berkeley, Calif.; Provo, Utah; Pittsburgh and Little Rock, Ark. And they’ve been proposed for towns as varied as Yankeetown, Fla.; Asheville, N.C.; and West Wendover, Nev.
The founder of the Phoenix-based hotel chain Inn Suites decided about a year ago that condo-hotels might work for his 11 properties. Since then, chief executive James Wirth has started converting the company’s Arizona properties in Yuma, Tempe, Tucson, Flagstaff and Phoenix, nearly half of the company’s total portfolio. The conversions should be completed in six to 12 months.
More condo-hotels are being built because they simply make financial sense, experts say:
• Hotel developers can spread risk to condo owners and earn income from condo sales at the time projects are finished.
• In some cases, developers can break even upon completion.
Further, condo-hotels by nature are better suited to surviving than hotels on its own, experts say. “Condo-hotels earn like commercial hotels and appreciate like residential condominiums,” said Dante Alexander, the founder of the National Association of Condo Hotel Owners. Condo buyers investing in condo-hotels buy the unit and allow the hotel management to rent it out when they’re not using it, sharing the revenue. This arrangement makes the most sense in cities that get more traffic from travelers. In certain smaller cities, developers instead build hotels with residential units.
Projects of both types are in development in 31 states throughout the United States, said Jan Freitag of Smith Travel Research. This almost certainly is a rise, although industry watchers say it’s difficult to estimate by how much, since little historical data exists. “That’s been a concept that’s worked in places like New York, San Francisco, Chicago for a long time, and that’s now filtered into other areas,” said Chris Meyer, director of the Milstein Center for Real Estate at Columbia University. While resort and vacation destinations are getting their fair share of condo-hotels, developers proposing them for smaller towns meet greater resistance. In McCall, Idaho, a group called Save Our Skyline opposes a $25 million plan to build a 50-foot-tall hotel with condos and retail space on the shore of nearby Payette Lake. “My guess is that this is going to turn this town upside down,” a member of the group, Tuck Miller, told the Idaho Statesman. The developer of a hotel with residences in Idaho Falls, Idaho, proposes a 13-story, 800-unit project that would be the tallest structure around, beating out a water tower. And in Raleigh, N.C., a local developer plans to build two hotels with condos, 21 stories and 25 stories in height, at opposing ends of its downtown. A June 20 headline in the News & Observer of Raleigh read, “Builders want to lift the skyline,” and the story notes that the projects would change the face of the downtown area. Proponents of smart growth — characterized by greater density and development that more closely integrates work and home life — say the popularity of condo-hotels validates the idea that more Americans want an urban lifestyle. “We’re at a time right now of a great deal of change. ... I would say the traditional urban subdivision paradigm is breaking down,” said Adam Gordon, editor in chief of the magazine The Next American City. “We have much more complicated patterns of where people are moving.”
Condo-hotels are part of that changing landscape, and they are multiplying because they make market sense, said John Norquist, president of the Congress for New Urbanism and a smart-growth advocate. “We’re kind of moving from an era where cities were building huge convention centers, and now they’re actually doing something that the market wants, blended with a hotel,” Norquist said. “These are all things that are healthy. It shows common sense. Cities and consumers and developers are all getting something without having to subsidize each other.” ABOUT CONDO-HOTELS • Condo-hotel rooms make up 19.5 percent of the hotel rooms under development in the United States, according to Smith Travel Research. • The top markets are Las Vegas Condo-Hotels, representing nearly one-third; followed by Miami/Fort Lauderdale; Orlando, Florida Condo-Hotels.; New York City; Chicago; Tampa/St. Petersburg, Fla.; Myrtle Beach Condo-Hotels; Boston; and San Diego. NOTE: Data as of March 2006 Investing in Preconstruction Real Estate
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