Stress Settles In At Condominium Hotels
Pigeonholing residential-led hospitality products has never been an easy task. For global brands that love to classify hotel-chain tier segments, the exercise has created absolute chaos in the meeting room strategy sessions. The only outcome has been bloodshot eyes and a grocery list a kilometer long.
Names over the years have ranged from condo hotels or the more ubiquitous condotels, residences, apartment hotels, suites, apartels, serviced apartments, extended stay, villa resorts and frankly, more incarnations then you can shake a stick at.
Second homes, vacation or holiday houses and investment properties have been with us for as long as mankind has realized that all work and no play makes Jack a dull boy: I can imagine the cavemen of prehistory looking at little underground caverns by the sea, thinking of them as holiday homes, and imagining how nice it would be to get away for a relaxing weekend.
Property developers took to the craze with equal fervor as they imagined entirely new markets of potential buyers looking not only at rental yields but also the major allure of that marketing buzzword "lifestyle".
Perhaps no other word in holiday lingo has inspired so many tourists from faraway places, after falling off an airplane and becoming caught up in soft winds, swaying palms, the gentle caress of the sun and perhaps a few too many Mai Tais, so sign on the dotted line for their own little piece of paradise.
As in all things that are molded into tasty bite sized pieces and carefully packaged, the condo hotel craze was developed, marketed and embraced by Americans. Much as their spacecraft, took men to walk on the Moon, US property developers flocked to the notion of selling property in dreamland.
The sector has had a chequered history, no dissimilar to the table cloth in an Italian restaurant. High profile legal cases in the US and Australia found, in some landmark decisions, that sellers were not engaging in real-estate transactions, but in the sale of securities. That opened a Pandora's Box of litigation, damage claims and bankruptcies.
In time, the industry moved forward – after significant government regulation. Today there are many fine markets – such as that in Hawaii – which see a dominant portion of hotel units that arc in fact condo hotels or managed residences.
While financial excesses during the financial boom of the early to middle part of the decade saw a resurgence of this kind of investment property in North America, and even the appearance of an urban model, the global financial crisis has left the segment battered and bruised.
While Asia loads the world in many aspects of the holiday business, it often lags behind the trends and products developed in the West. Perhaps it's the distance, or a bad case jet lag, or maybe they took a boat instead of an airplane.
The past few years has seen a surge in residential-led hospitality products in both the region and Thailand that is bucking the larger global trend. Liquidity, increasingly easy and affordable access and low interest rates are driving consumers to invest.
Promises ranging from guaranteed returns, free use and prestigious brand management are fuelling much of the frenzy, which is not only aimed at the resort markets but is also growing into metropolitan areas. Breakfast at Tiffany's is a hard act to follow and for many the allure of hotel living- even if only on a part time basis – remains shiny and sticky sweet.
Despite the private sector moving ahead at full throttle, Government regulation has lapsed in terms of key regulations and controls over the licensing of these establishments as hotels, the tax implications, guaranteed financial returns and consumer issues, including sustained brand-operator assurances.
At the same time, many inexperienced developers have tuned rental splits for purchasers at unsustainable levels. In some instances this has resulted in hotel operators facing financially unsustainable ongoing operations.
While Thailand Condominium Juristic Act saw an overhaul last year into a much more consumer-oriented model, much alternative property is sold to foreigners under leasehold, and this arrangement has yet to see a similar structure. Even coutry's Hotel Act, which was revised a few years ago to take in serviced apartments, has so far failed to address condominium, apartment and villa hotel managed units in a comprehensive manner.
The marketplace seems set for success and for failure on the part of both buyers and sellers. Meanwhile, Thailand needs to look at the issue of improved regulations and to set the wheels in motion for a broader scale of reform and regulation.