Owned-and-leased units get popular here.
News-Press.com
September 17, 2006
Hotel-condos are making their mark in Southwest Florida as the phenomenon gradually spreads from the major metropolitan areas where it began.
And as the projects proliferate, they're changing the types of people who come here and even the surrounding communities.
When urban dwellers think of hotel-condos, 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.
But in Southwest Florida, hotel-condos are catering to those looking for an annual Fort Myers Beach vacation, an investment or a second home in Naples that helps pay for itself.
Brij Misra, regional president and general manager for the Pink Shell Beach Resort & Spa on Fort Myers Beach, said that the resort will be fully converted to hotel-condo when the Captiva Villas building now under construction opens in April.
Pink Shell will continue to manage and lease out most of the 235 units but the people staying there will generally be more affluent than when it was a traditional resort two years ago, he said.
In a hotel-condo, rooms or suites are owned separately by investors and leased out when the owners are not staying there.
Misra said families and business customers will remain the mainstay of the clientele, he said.
But now with generally larger units, "Our rates are much higher than regular hotels. In the last two years, it has changed," he said.
D.J. Petruccelli, president of the Fort Myers Beach Chamber of Commerce, said hotel-condos are a mixed blessing for the Beach.
On the one hand, he said, they bring more tax money to the community as values rise.
But, he said, "I have some personal reservations. As far as condos are concerned, those people don't spend as much money as people who come in for a day, two days, three days."
It would not be a good thing for restaurants and other retailers if hotel-condos replaced all the hotels and motels on the Beach, he said.
Meanwhile, developer Gates McVey is remodeling older hotels in Naples and Bonita Springs and turning them into hotel-condos.
Latest is the 106-room StayBridge Suites in Bonita Springs, which Naples-based Gates McVey purchased for $9.3 million in November and renamed Inn at the Springs.
With 61 rooms being remodeled, Gates McVey plans to start marketing the project this fall, said Scott Lodde, president of Gates McVey Hospitality.
One potential market, he said, is Europeans who typically take their own vacations in the summer when rates in Southwest Florida are low. The more lucrative winter months could be rented out for a greater profit.
Other potential buyers, he said, include those who want a second home in Naples but can't afford the city's stratospheric prices for a complete house.
Hotel-condo projects can be found in different stages of development in cities around the country: Berkeley, Calif.; Provo, Utah; Pittsburgh and Little Rock, Ark., for example. And they've been proposed for towns as varied as Asheville, N.C.; West Wendover, Nev., and in Florida in Yankeetown.
The founder of the Phoenix-based hotel chain Inn Suites decided about a year ago that hotel-condos 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 a hotel 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 true hotel-condos 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 U.S., Jan Freitag of Smith Travel Research said. This is almost certainly 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 Mayer, director of the Milstein Center for Real Estate at Columbia University.
Construction in Las Vegas puts Nevada second only to Florida in terms of the number of condo-hotels being built, according to Smith Travel Research. And now Reno, the lesser-known, less glamorous cousin of Las Vegas, will soon get its first hotel-condo, and quite a large one at that.
Investors led by a developer, Thomas Schrade, bought the Reno Hilton in late June and announced a wholesale renovation. The top 11 floors of the 27-story hotel, which sits on 148 acres about 10 minutes from downtown, will be converted into hotel-condos. Renovation begins after the Labor Day holiday, and the interior renovation should be done by next summer.
The developers of the renamed Grand Sierra Resort and Casino hope the $1.8 billion redevelopment will attract more families and business travelers to Reno, a popular gambling destination. They plan to add a resort spa, 150,000-square-foot indoor water park, a four-level driving range, an 1,800-seat dinner theater, nightclubs and retail stores.
"We are well aware it is a second-tier destination, but I think it's poised for great success," Grand Sierra President Michael Carsch said. "Las Vegas is so successful and to a certain extent, they're going to be a bit of a victim of their own success. Reno, we believe, is a great viable alternative."
While resort and vacation destinations are getting their fair share of hotel-condos, 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 Raleigh News & Observer read, "Builders want to lift the skyline," and the story notes that the projects would change the face of the downtown area.
— The Associated Press contributed to this report.
