Miami Condo Hotel Buying Guide: What to Know Before You Invest

by Barbara Ciaccio

For ages, Miami has been the playground of choice for beach lovers, partygoers, wellness seekers and the average tourist. The constant demand from people wanting to live and play here makes Miami a natural pick for an investment property like a condo hotel. These types of properties go by many names; in the U.S., they’re mostly known as condominium hotels, hotel condos, and, of course, condo hotels. Internationally, they’re popularly known as condotels.

Almost every major hospitality brand either is part of one or is in the process of developing or collaborating on one. But, what is a condo hotel? What makes it a good investment? Why would anyone choose a condo hotel over a traditional condo, a short-term rental condo investment, or a timeshare?

— What Is a Condo Hotel and How Does It Work?

Condo hotels are typically high-rises built close to popular vacation destinations and operated by hotel brands such as the Four Seasons, Ritz-Carlton, St. Regis, Hilton, W Hotels, and more. In the building, along with the hotel suites, there are also condo hotel units, which are reserved for individuals who purchase them to own a second home or vacation property. Owners can place their condo in the hotel’s rental program to earn revenue while they’re away.

The best part of buying a unit in a condo hotel is that you get access to all of the 5-star amenities, services, and luxuries associated with the hotel brand. For example, if you own in a St. Regis-branded condo hotel, you can count on enjoying St. Regis’ butler services, among many other perks. Typical amenities of these luxury condo-hotels include a signature spa, fine dining, nightclubs, lounges, lavish pools, room service, a concierge desk, and housekeeping.

To the average guest, a condo hotel unit might seem no different than a regular hotel suite, but it is individually owned, and often bigger and more like a regular condo floor plan than a standard hotel suite.

— Is a Condo Hotel the Right Choice for Me?

If you answer yes to any of the following questions about condo-hotels, then a condo hotel could be the right choice for you:

Do you only plan on using it as a vacation property?
Do you only plan on visiting for a small percentage of the year?
Do you like the idea of owning a slice of luxury in a world-class hotel brand?
Is earning rental income while not using the property a priority for you?

— Advantages of Owning a Condo Hotel Vs. Traditional Vacation Condo

Before delving into the details of buying or owning a condo hotel, let's take a look at the various advantages a condotel owner gets by default:

Hassle-free vacation home with signature hotel amenities. One of the biggest attractions of buying a condo hotel property as a vacation home is having access to all the facilities of a resort. While housekeeping, room service, and a concierge take care of things during your stay, the hotel team or an on-site management company can take over when you’re away.
Hospitality-grade, professionally managed rental program. Another great advantage of being part of a brand is that if you put your condo in the hotel’s rental program, you have a professional team with years of sales and marketing experience in the hospitality sector working to your advantage. Not only does your condo get a professionally managed marketing team, but often a multi-million-dollar global reservation system keeps your unit in the limelight generating revenue all year. This, of course, comes with the hotel getting a share of the profits for its marketing and management.

On the other hand, some condo hotels allow you to hire a third-party management company to rent your property on Airbnb, for example, and you get to keep a bigger share of the revenue while still enjoying all the leverages and benefits associated with the hotel’s brand

Income is known to offset ownership expenses. Just like a regular vacation condo, a condo hotel also comes with its own set of expenses (condo association fees, maintenance, repairs, short-term rental taxes, etc.) However, many people can generate a regular stream of income that offsets the costs of ownership and even book profits on their property with the short-term rental capabilities of the unit.
Two-fold appreciation. Any kind of property is known to be an appreciable asset. One unique advantage to a condo hotel is that if the image of the hotel brand improves over time, it can increase your property rental rates and possibly your property value. A pre-construction condo hotel with a private club is also a great investment in the Miami real estate market.

— What Are the Differences Between a Timeshare and a Condo Hotel?

No joint ownership. Unlike a timeshare, wherein several owners get to use the same property as a vacation home, a condo-hotel is individually owned. You’re not sharing your condo or the calendar with anyone else.
No fixed time for vacation. Since you do not share ownership of your condo, the concept of time-sharing is also ruled out. In a timeshare, co-owners usually agree upon the vacation time they can have on the property, which is typically the same 1-2 weeks a year. However, as the sole owner of your condo hotel, you get to decide the number of days and times in a year you can use your vacation condo. If you’re enrolled in the hotel rental program, make sure to consult the blackout dates. These are generally peak vacation times or holidays when your condo is compulsorily blocked for renting out via the hotel program
Easier to resell. The idea of sharing ownership and splitting time with others can be a turn-off for many buyers. And can be complicated contractually. However, since a condo hotel unit is individually owned, it has a higher probability of appreciating over time and is easier to resell.

— Is Buying a Condo Hotel a Good Investment?

Just like any other investment vehicle, whether this turns out to be a smart pick or not depends on your needs and choices.

Here are a few elements that impact your return on investment::

Not all hotel brands are built the same. Your revenue directly depends on your condo hotel’s brand image and management. The stronger the brand value and management, the more you can expect to earn per night. This is why you have to carefully choose the right brand according to your investment capability.
Revenue splits. If you choose to enroll in the hotel’s rental program, keep in mind that you will be splitting revenues with the establishment. This means you could pocket anywhere between 35-60 percent of the earnings, depending on which condo-hotel you choose. However, from our long experience in the Miami real estate market, a 35% cut from a well-established, high-end brand could give you better annual returns than a 60% cut from a weaker brand.
Projected data limitations. Since developers are only allowed to sell condo hotels as real estate and not investments (according to the Securities and Exchange Commission), you will not be given any data on occupancy forecasts, proposed rates, or the expected rate of returns for pre-construction projects. However, existing properties can share historical data about earnings, which can give you a fair idea of what to expect. And the seller may also be able to provide insight on their returns and use behavior.
No guarantees on occupancy rates or income. Again, since the SEC restricts sharing any kind of projected data, no realtor or developer will commit to any kind of income or rate estimates. Also, your condo hotel earnings will be just as vulnerable to economic, political, or climate changes as the rest of the hospitality industry. So, the only thing one can do to safeguard their investment is to look into the checklist below and ensure a good buy.

— How to Ensure Your Condo Hotel Is a Successful Buy

Once you’ve decided that a condo hotel is the right choice for you, then look into the following checklist to ensure that it turns out to be a smart buy as well:

Good location. Make sure your condo-hotel sits in or near a popular vacation destination or at least in a neighborhood frequented by tourists, and is ideally walkable to attractions and restaurants.
Strong brand. Brand value is one of the most basic things that will help ensure better marketing, higher occupancy rates, and earnings per night. Thanks to global wealth expansion and the rise of ultra-high-net-individuals, the branded residences sector increased over 150%. The first-ever Dolce & Gabbana condo building in Brickell will also be a condo hotel. You will find this one and more famous brands on our list of condo hotels for sale below.
Attractive amenities. What’s a hotel without its amenities, right? Make sure that the amenities are on par with your purchase price. After all, spending more than a million dollars should fetch ultra-luxury amenities in a five-star establishment.
Solid management. Even the most enticing amenities can turn lackluster without the proper care and maintenance. Solid management should make sure that your condo and the hotel itself are always in tip-top condition.
Survey and Compare. Check out neighboring properties, condo hotels in different parts of the city, the unit itself (if it’s ready), prices of similar condo hotels, etc. before making a final decision. An experienced brokerage or real estate agent can help you with this and should know some of the best options in your target market. Also, in some markets small units perform better, such as studios, 1 and 2 bedroom options, whereas in other markets larger 2 or 3 bedroom units have higher occupancy rates.
Read the fine print. Make sure you know about your association’s fees and rules, any restrictions, details on the rental program, its blackout dates, and revenue splits. An informed decision is the best decision.
Ask a lot of questions, especially if it's your first condo-hotel investment. This is the only time you have to ask as many questions as you want and clear every doubt you may have. Once you sign the dotted line, little can be done after.