ASIAN INVESTORS ARE willing to spend more on branded condotels. Beside getting star-hotel facilities, the potentials of generating income from branded condotels are more promising than buying ordinary condominiums.
Over the past decade many developers have developed the concept of condominium hotel (condotel) by which they built condominiums and then brought in renown hotel chains to operate them. The property market, which seemed to be saturated with the ordinary concept of condominium, enthusiastically welcomed the condotel concept.
Even in Asia investors now dare pay for branded condotels, which they view as more elite, prestigious and providing more comforts as compared with ordinary condominiums. Many investors have interest in buying branded condotels because they not only offer star-hotel services and facilities but also big income potentials.
The owners of condotel units can ask the hotel operator to rent them out when they do not use them for certain periods of time. And, they do not have to pay the condotel operators for their service because condotel rental earnings are equally divided between them.
Additionally, owning branded condotel units is so alluring because their owners can sell them at so high prices when they want to, all the more so that the condotel operator succeeds to keep high the condotel’s unit occupancy. This is the reason why owning branded condotel units is more profitable than buying ordinary condominium units. In Singapore, branded condotel is priced at S$4,000 per sqm, well above the ordinary condominium that sells for S$2,500 per sqm.
Nigel Comick, chief executive officer of Raimon Land Public Co Ltd, a luxury property developer in Thailand, was quoted by propertywire.com as saying: “No one had seen an investment like this in Singapore and they sold fast. People were paying a premium for name and the brand.” Comick added that plans had been made to build branded condotels in Thailand’s prime areas.
In the US, branded condotels are managed by renown hotel operators like Four Seasons, Trump, Westin, Hilton, W, Ritz, Rosewood and Hard Rock Hotel. Branded condotel investment can be said to be investment with minimum risks but it can generate big income. However, several matters should be taken into account before buying branded condotel. Firstly, location.
Location is always an important factor in property investment. It determines occupancy rates. Normally, condotels are located in areas often visited by expatriates, business people and tourists. Many condotels were built in locations of luxurious resort settings mostly in downtown areas that are visited by many people. Accommodations in such areas offer high tariffs.
Attention should also be given to competition in the condotel location, not only competition between condotels but also between condotels with apartments, condominius and other hotels. More residential buildings around the condotel mean fiercer competition. Secondly, infrastructure and public facilities around the condotel.
Condotels with easy access to places like shopping centers, amusement sites, restaurants and tourist sites are surely more attractive to buyers. Another factor is the concept upheld by the condotel, which relates to its location and market targets. Appropriate concepts will make condotels more attractive. Also important is the management of the condotel. Better known operators and more quality services surely will give higher added value to condotels.
It is worth noting that condotels are not long-term residential needs. Many condotels limit the stay periods for their owners. This is because the main concept of condotel is that it is a hotel. The selling prices of branded condotels are high. But, they are also determined by other factors.
Some branded condotels guarantee periods for making generating profits. When branded condotel units are sold by their owners when their guarantee periods end their prices will drop, albeit lightly. Indeed, branded condotels are very promising investments, but careful considerations are required before buying them. Renown brands can be misleading.
According to Hasman Rusli, director of PT Procon Indah, people should be very careful in making decision to buy branded condotel units. He says many developers now offer their condotels with rental guarantees that are merely advertising gimmicks. “almost all developers of branded condotels offer rental guarantees to buyers. Actually, they are merely the gimmicks of condotel developers.
They subsidize rental guarantees that are provided by hotel operators. Example, when hotel operators provide rental guarantees of 10 percent per year, developers can raise them to 12-13 percent per year during their selling periods. After that, I think, rental guarantees no longer play any roles and are replaced with market competition,” Hasman said. So, investors should be very careful and smart in making decision to buy condotels, he noted. (Deddy H. Pakpahan)