Condotels – The Vacation Industry’s Next Big Trend

March 22, 2021

In the five years prior to COVID-19, the short-term rental market sky-rocketed with a growth of 300%. Despite a tough year grappling with the side-effects of a pandemic, performance is trending upwards and vacation rentals look set to stay as the preferred accommodation for travelers across the US.

COVID-19 had a harsh impact on hotels and short-term rentals but the industry is bouncing back fast, vacation rentals faster than hotels! The changes in travel behavior in a COVID-19 world, the convenience of a vacation home where you can remain within your bubble, and catching up on missed travel opportunities (revenge travel) are all contributing factors. Property Managers in sought-after travel destinations are struggling to meet the demand for rentals and growth is on the road map for many.

Guesty’s short-term industry report for March 2021 shows that 83% of respondents believe travelers will continue to book short-term rentals over hotels and 60% anticipate that hotels will incorporate short-term rentals into their business models. Traditional lodging is a thing of the past and is being replaced by trendy short-term-rentals and the vacation industry’s next big trend, Condotels. Guesty’s survey also shows that 75% of property management companies are making plans for expansion to their portfolio in 2021 with 20% looking to purchase more properties. Are condotels a trend worth investing in?

What is a Condotel?

Condotels go beyond your typical vacation condo! A condotel is a condominium-style complex that looks, feels and functions like a hotel. Each unit is individually owned and the investor retains all ownership and rights to live in, or rent out, the condo as they desire. Condotels are attractive to investors entering the vacation market and are currently trending as a smart and hassle-free investment option to grow your real estate portfolio and earn passive income. Condotels are not subject to the same constricting limitations and laws that apply to residential short-term rentals, making them an excellent (and legal) solution for the vacation rental industry.

The Benefits of Condotels

Whether you’re looking to live a vacation lifestyle or make money on the side, the benefits of purchasing a condotel unit are impressive.

Ownership: Condotels are not timeshare! Each unit is privately owned with deeded ownership and the investor retains all ownership and rights to the condo.

Passive Income: Whether you’re purchasing a condotel unit primarily as a vacation home to rent out occasionally or purely as an investment, you’ll receive a great ROI and a monthly income from your rentals to provide a passive income and increase cash flow.

Branding: Many Condo Hotels are run by well-known luxury hotel brands taking the opportunity to turn loyal guests into loyal residents. There’s no need to build your brand from scratch or find your market and guests, this is all done for you when you purchase a unit in a branded Condo Hotel.

Resort-Style Amenities: Not only are you getting a turn-key, stylish, and serviced vacation condo with all the comforts of home, Condotels boast resort-style amenities and facilities for a luxurious vacation experience. From valet parking, front desk concierge services, and daily housekeeping to restaurants, fitness centers, and luxurious spas, condotels go beyond your typical vacation condo!

Hassle-Free: Every property manager will agree that maintaining a vacation rental unit is a headache. Keeping your home in good shape is ongoing in a short-term rental but when you purchase in a Condo Hotel, you place your unit in the rental program and entrust your property management to the professionals.

Tips for Investing in a Condotel

Investing in an income-generating vacation rental is a big decision and there are many factors that will determine your success. To generate a passive income and make money for the short-term rental of your condotel unit, some homework is required.

Location: For a consistent and steady income it’s important to choose a desirable travel destination and high demand location. Research the local vacation rental real estate market carefully, study the tourist activity and hotel occupancy, and familiarize yourself with short-term rental regulations for your location.

HOA Fees & Rules: Home Owners Association Fees and Rules are important! High monthly dues will only take from your profits and strict rules, bylaws and rental restrictions could limit your guests and occupancy. Read the fine print carefully before making an offer.

Management Fees: Your unit will be placed in the condotel’s rental program to run the complete management of your investment. The property manager will charge a percentage fee that can range anywhere from 30% to 50% of the nightly rate. Again, read the fine print carefully to ensure there are no surprise fees.

Condotels offer the best of both worlds! A safe and serene home away from home with the ability for easy isolation and the benefit of hotel services and resort-style amenities.