The condo-hotel is the newest trend in real estate
A new investment opportunity: the condo-hotel
In recent years, we have witnessed a true revolution with the emergence of the sharing economy disrupting traditional sectors and forcing conventional businesses to rethink their business models. Platforms such as Airbnb, Uber, and Housers introduce new business models that seek to democratize sectors once previously reserved for a select few. The tourism sector has been a prime target for disruption, with new business models rapidly evolving, leading to an array of new investment opportunities. One such investment opportunity is the new cross between a hotel and a condo known as the “condo-hotel.”
This relatively new phenomenon, born in the USA in 2006, combines accommodation in a hotel with ownership of a property. This model allows for the sale and private ownership of rooms in the hotel, with management and maintenance taken care of entirely by the hotel. Thus, instead of simply renting a hotel room, the guest who buys the room actually becomes the owner of the hotel room. This model allows the buyer to pay for their vacation days in advance, while actually purchasing a piece of real estate.
The investor receives deeded ownership to the property under a condominium contract, while the hotel takes responsibility for the management of the hotel. The investor is also able to use the accommodation on certain days of the year, and when they are not using their condo, they are able to rent out their condo and leverage the marketing and management done by the hotel chain. In this case, the investor actually owns a part of the hotel property and will proportionally receive benefits for its use.
Italian condo-hotel market
This new type of property investment is rapidly spreading in the Italian market. According to data from ISTAT, in 2016 Italian hotels had 90.3 million reservations with an average stay of 2.97 nights. Other tourist accommodations recorded 26.7 million reservations with an average stay of 5.07 nights. Nevertheless, while the Italian hotel sector registered an increase of 1.8%, other forms of tourist accommodations grew by around 4.2%.
Through the condo-hotel, hotel establishments are adapting to changing consumer needs, thus making hotels more competitive in a fiercely competitive and rapidly changing market. This model allows them to compete with new sharing economy platforms such as Airbnb by leveling the playing field. Thus, hotels effectively adapt to new forms of consumption preferences.
In Italy this new investment model is already underway with the Allegroitalia Hotel & Condo. This condo-hotel has an annual turnover of over 20 million euros and is among the pioneers of the condo-hotel segment in Europe.
For smaller scale investors, condo-hotels provide the perfect opportunity to gain entry into the tourism sector where benefits may even exceed those gained by a traditional property investment. This type of project is particularly attractive because of its duality. On one hand, it is a real estate investment with all of the expected advantages of investing in a tangible asset, while on the other hand, it is also an investment of a touristic nature, which could lead to an even higher profitability with rental opportunities.
Through this opportunity, investors will acquire all of the traditional benefits of owning a second residence, without the obligation of having to manage and pay expenses for the upkeep of the residence. The investors will be owners of the tourist accommodation, complete with hotel reception, porters, cleaning services and all of the other advantages that are assumed to guests who spend the night in a hotel. Nevertheless, when staying in the condo-hotel, the investor is not a guest, but an owner.
The first condo-hotel financed via crowdfunding
Castellero, our latest development loan project, entails the transformation of a 14th century castle, situated on a world-renowned UNESCO heritage site in the Piedmont region of Italy, into a luxury condo-hotel.
The developer, Faberstone Capital, has already completed 3 real estate projects to date in the Langhe-Monferrato for over 5 million euros. The management of the company has extensive experience in the private equity sector in Barclays Private Equity, JPMorgan Chase & Co, and Ernst & Young.
The Castellero Resort project also includes Engel & Völkers as a commercial and marketing partner, as well as Bertone Design as an interior design & communication partner.
Founded in 1912, Bertone Design, is one of the most prestigious design companies in all of Italy. The company is famous for its iconic “Made in Italy”signature in the automotive sector. After decades dedicated to the automotive sector, Bertone evolved and diversified its business in several areas, including architecture and interior design.
Engel & Völkers is the well-known leading company worldwide in the intermediation of high quality residential and commercial properties, yachts and airplanes in the premium segment. The company currently operates in over 30 countries and on four continents, offering customers a range of tailor-made professional services. They will operate through their international network on an exclusive basis for the sale of the Castellero apartments.
