I'm an investor considering some condo hotel purchases. I know that Las Vegas is a hot housing market, but I'm a little skeptical about the condo hotel concept in Vegas. From an investment standpoint, it would seem important that the room be placed into the hotel pool and rented out consistently at an attractive rate.
However, in Vegas there are so many hotels competing for guests. The rates are often intentionally low in order to lure customers into their casinos. And the really big spenders usually get their rooms comped and thus they have no incentive to stay at a condo hotel or purchase one as a second home. Wouldn't the tremendous competition, low rates, vacancies, and the absence of big spenders make the condo hotel concept a challenge in Las Vegas?Let me try to answer your questions and address your assumptions. Las Vegas is one of a kind. It is resilient. It has faced adversity in the past and has reacted positively in every instance. Each time it has come out stronger. It is a better market today than it was yesterday. It is more diversified today (more room generators) than it was yesterday. Who knows what the future will bring, but there will not be another Las Vegas. Atlantic City tried but it only put a dent in Las Vegas business. The Indians have tried - only a dent. Riverboat gambling - again only a dent. Certainly every hotel must compete. That is why when we counsel our clients, we emphasize the key ingredients to a successful hotel operation; namely, location, 4-5 star quality, the right hotel franchise and management company, the appropriate amenity package and a fair split between the developer and the individual owner. I would not at all be concerned about comp rooms. The ones who get comp rooms represent an extremely small portion of the total market. Comp rooms used to be more prevalent in the past. That is not the case today. It is good to be cautious. You raise legitimate points. Clearly, we may disagree, but my bottom line to you is that if your concerns prevent you from sleeping at night, then you should not consider Las Vegas. On the other hand, I can tell you about the overwhelming success MGM Grand had in its selling condo hotel units. It sold out 100% of its 576 units in less than eight weeks! In fact, there was so much demand that the developers are now building a second tower, identical to the first, to be completed in 2007. And I certainly can tell you about Steve Wynn, who is in the process of building a monster new hotel, and others who say their biggest mistake was that they underestimated the strength of the Las Vegas market. In my humble opinion and that of many hotel industry people across the country, Las Vegas is a tried and true hotel/vacation home market which is still many miles away from product saturation.
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.