CONDO-HOTELS ON THE MOVE IN FLORIDA

by Lisa Simundson
Meetings South, April 2005

There was a time when, if a hotel or resort "went condo," its days of being a hotel were basically finished. Today, however, the hard distinction between "hotel" and "condo" has been blurred by the emergence of a relatively new concept in the hospitality industry-the "condo-hotel."

The idea of living at a hotel is nothing new; the rich and famous have been doing it for decades, taking up residence in luxury digs with Ritz-Carlton and Four Seasons in the address. However, unlike hotel residences-which are true first or second homes-condo-hotel units that are purchased by individual owners, either as an investment or vacation residence, are placed in a rental program during the time when owners aren't using them.

But don't start thinking "time share" just yet; the buyers of rooms in a condo-hotel actually own their piece of the property, earning a percentage of the rental income, and are not locked into certain weeks of the year for usage.

There are, however, certain usage restrictions for those purchasing units in a condo-hotel, necessitated by the fact that the property is, first and foremost, still a hotel and still generating bed-tax revenues for cities in which they are located.

"It's really a living, breathing hotel. For 99.9 percent of the units we own, nobody ever lives in them," says Chris Falor, vice president of architecture and engineering for the Falor Cos., a Miami- and Chicago-based hospitality firm that has already converted or is presently converting a slew of South Florida properties into condo-hotels, including Cheeca Lodge in Islamorada and four high-profile South Beach properties: the Tides; the Royal Palm Resort, which will become a Sol Melia property; and the Breakwater and Edison, which will be merged into one 113-suite property.

A previously announced deal to purchase and convert the Omni Colonnade in Coral Gables recently fell through, though the Falor Cos is proceeding with the purchase and conversion of the Hilton Palm Beach Oceanfront.

"[Our owners] have the right to use them 30 to 45 days a year, depending on what they set up when they bought the unit," Falor says. "[But] an owner can't just show up and say, 'I want that person out of my room.'"

In fact, there are times when owners must give up to three months' advance notice before using their room, which keeps the hotel accessible to transient visitors who often have no idea they're staying in a unit owned by an individual buyer.

"It operates as a hotel in its entirety. The difference is in the ownership side and in the financing side," says David Falor, chairman of the Falor Cos. "What we do is sell real estate, not income, to individuals. And if they choose to, and they don't have to, they can put the unit in a rental management program."

However, the vast majority do take advantage of the program, David Falor says, leaving the bulk of rooms in a condo-hotel available for bookings, including group business.

"[Our hotels] do group or convention blocks just like any normal hotel does," Falor says. "So if an owner calls in and it's already booked for a group or convention, it's booked. It's not available."

If planners wanted additional assurance that enough rooms in a condo-hotel would be available, though, they could always consider mixed-use properties such as downtown Miami's Four Seasons, which includes 221 regular hotel rooms and suites, 89 condo-hotel units-50 percent of which are currently rolled into the hotel inventory-and upper-floor residences that are not part of the hotel pool.

For the Four Seasons, having the extra inventory has been a major advantage in courting group business, says Eveliny Bastos-Klein, a hotel spokesperson.

"We've taken more than one group that was much larger than we would have been able to accommodate otherwise," she says. "For us, it's great. A meeting planner who wouldn't consider us before-now they can."

Unlike the rooms at some of the Falor properties-which are straight hotel rooms with no kitchens-all the condo units at the Four Seasons have kitchens and are a bit larger than the standard guest rooms. However, at other properties such as the Pink Shell Beach Resort & Spa in Fort Myers, there's a mix of studios without kitchens and one- and two-bedroom, residence-style units.

"It's a very new concept that varies greatly," says Bastos-Klein.

Though the majority of condo-hotels in Florida are clustered in South Florida, the idea is catching on throughout the state as developers realize the financial advantages of operating a debt-free hotel that is more likely to withstand any downturn in the market and less likely to change hands and brands.

"The concept is growing by leaps and bounds," says condo-hotel broker Joel Greene, president of Miami-based Condo Hotel Center, which markets condo-hotels throughout Florida-including properties in Orlando, Sandestin and St. Augustine-as well as in Chicago, Las Vegas and a handful of resort areas such as Avon, Colo., and Myrtle Beach, S.C.

"We went from having a website that produced 143 buyers for us in 2003 to a database that's almost 3,900 at this point," Greene says. "In December 2003, we had four people contact us the entire month, and by December 2004, that number was over 850."

However profitable the condo-hotel boom may be for the buyers and sellers involved, it has some in South Florida unhappy. At press time, the Miami Herald reported that one of the city's grande dame properties-the Sheraton Bal Harbour-had been purchased by Miami-based Related Group of Florida and was scheduled for demolition to make way for both condominiums and a 250-room St. Regis condo-hotel.

The nearly 50-year-old property was designed by famed architect Morris Lapidus-who also created the landmark Fontainebleau and Eden Roc hotels-and was one of his finest achievements, according to local historian Dr. Paul George.

"It's a crying shame," George told the Herald.

Aside from its cultural significance, the Sheraton Bal Harbour was also an important part of Greater Miami's convention hotel inventory. The property will remain open until May 2006.

As the venerable hotel heads into history, it remains to be seen how condo-hotel conversion affects leisure and group business in the long run, as more and more buyers compete with travelers for condo-hotel rooms.

Movers & Shakers

The following is a sampling of condo-hotels in Florida.

• Cheeca Lodge & Spa, Islamorada
• The Tides, South Beach
• The Setai, South Beach
• Fontainebleau II & III, Miami Beach
• Acqualina, A Rosewood Resort, Sunny Isles
• Trump International Sonesta Beach Resort,Sunny Isles
• Sonesta Resort, Key Biscayne (opening 2008)
• Conrad Miami
• Mayfair Hotel & Spa, Coconut Grove
• The Atlantic, Fort Lauderdale
• W Hotel & Residences, Fort Lauderdale (opening 2006)
• Hilton Fort Lauderdale (opening 2006)
• Trump Fort Lauderdale Beach Club and Trump Fort Lauderdale Hotel & Tower (opening 2007)
• Pink Shell Beach Resort & Spa, Ft. Myers
• Plaza Resort & Spa, Daytona Beach (opening late summer 2005)
• Reunion Resort & Club of Orlando
• Villas at ChampionsGate, Kissimmee (opening 2006)
• Pelican Pointe Condo Hotel, Clearwater Beach
• Laterra, St. Augustine