If a condo hotel has a recognized management company such as Ritz Carlton, Trump International, Hilton, or Hyatt, what is their profit?
They typically receive a management fee of 10-12% of the rental revenue. Obviously, the better job that they can do, the more revenue the hotel owners/developers make, and the more they make.
Will the owner of the condo benefit in buying a condo hotel unit that has a recognized brand? In other words, is the added expense of buying into a brand-name property justified?
Ask yourself a simple question. Assume that there's a Ritz Carlton in a city you wish to stay in charging $500 night, and just up the block, there is a boutique hotel charging $479 a night. The boutique hotel looks charming enough from the outside, but it's name "Almost Home Boutique Hotel," doesn't really give you an idea of how beautiful it truly is unless you get out of the car and go inside. Now, do you save the $21 extra dollars and take the time to go in, or since you already know what you'll get with Ritz because you've stayed at other Ritz Carlton's before, do you go there? If you can afford that kind of nightly rate, you'll probably stick with what you know, and not try to save the cost of your goose pate appetizer in their restaurant. One more point to consider. How much advertising money do you think is being spent by "Almost Home" to bring in buyers through their reservation system? Ritz Carlton, Hilton, Hyatt, Trump International, etc. are marketing machines, advertising to a world of buyers, and their name brings in the bodies, or as they say in the biz, "heads in beds." Now, if you owned the unit, would you feel more comfortable knowing that Ritz Carlton would be renting out your unit with their round-the- clock reservation system, or that Ann-Marie Wilkins, at Almost Home's front desk from 9-5 would be there booking your unit? You know that phrase "You get what you pay for?" Very applicable here. In my opinion, the franchise is as important, maybe more, than the old real estate adage -- location, location, location.
The above questions were 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.