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What in the World Is Going On
with Condo Hotels Now? 
By Jim Butler, Hotel Lawyer, Author of

Condo Hotel Lawyer Las Vegas. On November 30, 2006, I will be participating in the first two opening general sessions of IMN’s Symposium on Financing, Developing and Operating Condo Hotels at the Mirage in Las Vegas, Nevada. This will be an interesting opportunity to compare notes and take the current pulse of the industry. Is the bloom off the rose? Can condo hotel deals still be done? Where is the opportunity now? How do you capture it? What are the pitfalls? How do you make a condo hotel deal work today?

Why are more than 550 people coming to a condo hotel symposium in late 2006??? Obviously there is a huge continuing interest in the condo hotel phenomenon, but is the model sustainable in the current environment? Unless there are unique features, great sponsorship and market validation? Where are we? What is happening? 

Where are we?

Our perspective. We have been the business and legal advisors to clients on more than 80 hotel-enhanced mixed-use projects, all of which have at least a significant condo hotel element. These deals are in every major market in the U.S., as well as Latin America and Europe.

Here are some thoughts gleaned from our experience:

  • The condo hotel market is slowing down. The speculators or “flippers” are all but gone, and some think that they may have accounted for up to 80% of the condo sales in some markets. The eight-hour blow out of Trump’s Hawaii project or the one-day sell out Paul Allen’s Seattle project are the exception to the rule.
  • Many foreign markets may be at early stages of condo hotel development – say in Mexico, Costa Rica, the Caribbean, Europe and Asia. However, in general, we are in an advanced stage of the cycle in the U.S., and all of my comments here relate to the U.S. market unless otherwise noted.
  • Things are “normalizing” but definitely not dying. The level of activity over the past few years has simply been unsustainable. Normalizing is good for the long run and good for quality players.
  • Great projects with great sponsorship in good markets will continue to get done. Not all projects will get done. Not all projects should get done.
  • In general, most resort markets will be stronger than most urban markets. Many secondary and tertiary markets will languish, except in unique circumstances driven by real consumer demand.
  • The condo hotel business is driven by a confluence of factors, including difficulty in financing hotel development, skyrocketing construction costs, premium prices consumers have been willing to pay for convenience . . . but overall, the driving force has been consumer demand for condos. 
  • This driving force is waning! It is not a melt down. It is a normal cyclical event. It corresponds to the rest of the demand for residential real estate. That is what condos are!!! 
What does it all mean?

A residential condo slowdown in the US should not be shocking to anyone. Have you read what is happening to homebuilders’ business? Have you looked at recent stock performance for homebuilders? Why would the market for condos in a hotel be that much different?
Actually, it could be different, but experience is demonstrating that condo hotel purchases are more closely related to the residential market where things are slowing down, than to the hotel market where the transaction pace is furious. In fact, more hotels were bought and sold in the first 6 months of 2006 than in all 12 months of the prior year, suggesting that we could be on track to have twice as many hotel purchases this year as last year. 

The condo hotel boom is barely starting in China, India, Latin America and Europe. It may have a long way to go there before reaching the “mature” end of the cycle, as we think it has in the United States.

The bottom line.

My friend Taz Brown, VP with Sunburst Marketing and one of the top luxury residential marketing guys in the country, recently said “The field is getting slippery and you need long cleats to run the field, much less score.”

That statement pretty well sums it up for the condo hotel situation right now. But there is a bright and enduring future for the hotel enhanced mixed-use. And this is something that would have been all but impossible without the condo hotel phenomenon. But to take advantage of the situation you have to adopt a new way of thinking as condo hotels morph into a reliable and predictable component of projects.

But more on that in the near future . . . and after I take my own temperature at IMN’s Condo Hotel Conference in Las Vegas. Maybe I am one of the only people on the planet who thinks the tide has turned and success will be more elusive, calling for new approaches and strategies. (including going back to the Condo Hotel Fundamentals—5 Keys to Success!)

About the Author:
Jim Butler is recognized as one of the top hotel lawyers in the world.  He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders.  Jim leads JMBM’s Global Hospitality Group®—a team of 50 seasoned professionals with more than $40 billion of hotel transactional experience, involving more than 1,000 properties located around the globe.  In the last 5 years alone, they have brought their practical advice to more than 80 “hotel-enhanced mixed-use” projects, a term Jim coined to fill a void in industry lexicon.  This term describes one of the hottest developments in real estate-where hotels work together with shopping center, residential, office, retail, spa and sports facility components to mutually enhance the entire project’s excitement and success. Jim and his team are more than “just” great hotel lawyers.  They are also hospitality consultants and business advisors.  They are deal makers.  They can help find the right operator or capital provider. They know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow of capital with their legal skill, hospitality industry knowledge and ability to find the right “fit” for all parts of the capital stack.  Because they are part of the very fabric of the hotel industry, they are able to help clients identify key business goals, assemble the right team, strategize the approach to optimize value and then get the deal done.  Jim is the author of the Hotel Law Blog,  He can be reached at +1 310.201.3526 or



Jim Butler
Chairman, Global Hospitality Group
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars, 7th Floor
Los Angeles, CA 90067-4308
(310) 201-3526 direct


Also See: The Previously Announced $3 billion Las Ramblas Project in Las Vegas Pulls the Plug; Construction Costs Came In More than Twice the Estimates / June 2006
Donald Trump's Las Vegas Project, the $500 million Trump International Hotel & Tower, Not Beset by Problems Facing Other Proposed Vegas High Rises / March 2006
Weakening Demand for Condos Leads to Re-evaluation of the Canyon Ranch Living Community in Bethesda, Maryland / August 2006
Peter Morton's Planned $1 billion Condo Hotel Expansion of the Hard Rock Hotel Canceled; Sales Staff Let Go, Buyers Offered Refunds / February 2006

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