Are Condo Hotel Markets Like Orlando,

Miami & Las Vegas Saturated?

Question: I am considering the purchase of a condo hotel unit in a property next to the Orlando Convention Center. I know the hotel occupancy rate in Orlando is around 80%, so I figure this will be a good investment. I see that there are many other condo hotels that will soon be coming on the market. Do you think these are going to start to saturate the market?

A: This market is one of the strongest in the nation in terms of overall occupancy and attractions to keep bringing people back year after year. I like the market and am not concerned one bit about over-saturation.

Apparently, I'm not the only one unconcerned. We met with a developer just this past April 2005 who is about to begin development of several condo and condo hotel projects that will ultimately add over 6,000 new units on the market. And he is just one of many developers with huge projects in that market that we have been following.

Q: I have seen on discussion boards of Florida rental homeowners that the rentals are off from year to year. I was curious as to your thoughts on that.

A: They are watching rentals of properties that are unlike the condo hotels of four- and five-star quality, and which are not yet on the market. Making a judgment about this would be like the sales force at Cadillac getting worried because sales at Ford are off offer this quarter. Not a fair comparison.

Remember rentals of condo hotel units will mostly be going to people who are visiting the area and need a hotel room for the night. That's a completely different renter than one who is renting a single-family home or condo on a 6-month to one-year lease.

Q: Comparing Orlando to the Miami, someone told me that the Miami condo hotel market only has about 50% occupancy rates. Is this what your research has shown?

A: Watch who you get your information from, as this person does not sound like someone in the know. If occupancy could only support 50%, would developers be stepping all over themselves to get their projects up sooner than the competitors?

Before committing to developing $100,000,000 projects, they exhaust tens of thousands on marketing and feasibility studies, and it looks like they are all coming to the same conclusion. Build, build, build because it makes a whole lot of sense.

And, since they remain your 50-50 partner in the rental revenue it's not like they sell off the condos and they are out completely. If they screw up, then they are screwed in the process.

I've lived in this market 37 of my 40 years. I've been involved in selling hotels/motels and condo hotel units since 1988. Avg. occupancy has usually ranged in the 68-74% area. This varies, obviously, due to a dozen factors, but if hotels if sustained occupancies near 50%, developers would commit Hari Kari. As for me? I'd get into the resale market as I would have a ton of desperate-to-sell owners.

Q: How about Las Vegas? Again is this market saturated? I can't believe what they are now getting for these.

A: Saturated??? 88.6% year-round occupancy and 45% annual appreciation says they are as saturated as a piece of matzoh (dry crackers) right out of the box. Hardly!

Q: Joel, thank you for your time, I enjoy your Property Alerts. They have opened me up to a new world of real estate investing.

A: Hopefully, one day, you'll choose to do some investing with me.

The above question was submitted via e-mail by a visitor to www.condohotelcenter.com. The answer was prepared by Joel Greene, a licensed real estate broker with Condo Hotel Center which specializes in the sale of condo hotel units and fractional ownerships in private residence clubs.